The dollar index (DXY00) on Tuesday rose by +0.06%. The dollar on Tuesday recovered from early losses and posted modest gains. Strength in quarter and month-end demand for the dollar lifted prices Tuesday. Strength in stocks Tuesday has curbed liquidity demand for the dollar. Tuesday’s US economic news was mixed for the dollar after capital goods orders rose more than expected, but consumer confidence unexpectedly declined.
US Feb capital goods new orders nondefense ex-aircraft and parts rose +0.7% m/m, stronger than expectations of +0.1% m/m.
The US Jan S&P Core Logic composite-20 home price index rose +6.03% y/y, the largest increase in 14 months.
The Conference Board US Mar consumer confidence index unexpectedly fell -0.1 to a 4-month low of 104.7, weaker than expectations of an increase to 107.0.
The US Mar Richmond Fed manufacturing survey unexpectedly fell by -6 to -11, weaker than expectations of no change at -5.
The markets are discounting the chances for a -25 bp rate cut at 14% for the next FOMC meeting on April 30-May 1 and 79% for the following meeting on June 11-12.
EUR/USD (^EURUSD) on Tuesday fell by -0.03%. The euro Tuesday gave up an early advance and turned lower after the dollar recovered from losses and posted modest gains. The euro was also under pressure due to dovish comments from ECB Governing Council member Muller, who expressed confidence that the ECB could start cutting interest rates in June. The euro found early support from Tuesday’s stronger-than-expected German Apr GfK consumer confidence report.
The German Apr GfK consumer confidence index rose +1.4 to -27.4, stronger than expectations of -28.0.
ECB Governing Council member Muller said data over the coming weeks may be sufficient to confirm the slowdown in inflation by the time ECB policymakers set borrowing costs in June.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 11% for its next meeting on April 11 and 94% for the following meeting on June 6.
USD/JPY (^USDJPY) on Tuesday rose by +0.08%. The yen Tuesday gave up an early advance and turned lower after the dollar recovered from losses and moved higher. The yen initially moved higher Tuesday, based on comments from Japanese Finance Minister Suzuki, who warned that Japanese authorities “would take the appropriate steps” against excessive currency moves, bolstering speculation that Japan is close to intervening in currency markets to support the yen. A decline in T-note yields on Tuesday was also supportive of the yen.
Japan Feb PPI services prices were unchanged from Jan at +2.1% y/y, which was right on expectations.
Japanese Finance Minister Suzuki said the Japanese government will take appropriate steps against excessive currency moves without ruling out any measures.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 4% for the April 26 meeting and 38% for the following meeting on June 14.
April gold (GCJ4) on Tuesday closed up +0.8 (+0.04%), and May silver (SIK24) closed down -0.268 (-1.0-8%). Precious metals Tuesday settled mixed. Gold found support in comments from ECB Governing Council member Muller, who expressed confidence the ECB can start cutting interest rates at the June meeting. Also, Tuesday’s decline in global bond yields supported precious metals. In addition, geopolitical tensions in the Middle East are boosting safe-haven demand for precious metals after talks for a cease-fire between Israel and Hamas stalled.
Precious metals fell back from their best levels on Tuesday, and silver fell into negative territory after the dollar recovered from early losses and moved higher. Silver prices were also undercut by negative carryover from a slide in copper prices Tuesday to a 1-1/2 week low.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
