The dollar index (DXY00) today is down by -0.71%. The dollar is under pressure today as trade worries eased after the US delayed a 25% tariff on goods from Canada late Monday. Also, China’s restrained response to US tariffs eased concerns of a broader trade war. Stabilization of stock prices today also reduced liquidity demand for the dollar.
Losses in the dollar accelerated on today’s weaker-than-expected US JOLTS job openings and factory orders reports. Monday evening’s comments from Chicago Fed President Goolsbee were hawkish for Fed policy and dollar-supportive when he said the Fed should proceed cautiously before cutting interest rates.
US Dec JOLTS job openings fell -556,000 to 7.6 million, showing a weaker labor market than expectations of 8.0 million.
US Dec factory orders fell -0.9% m/m, weaker than expectations of -0.8% m/m and the biggest decline in 6 months.
Monday evening, Chicago Fed President Goolsbee said, “The Fed has got to be a little more careful and more prudent of how fast interest rates can come down because there are risks that inflation is about to start kicking back up again.”
The markets are discounting the chances at 15% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) today is up by +0.30%. The euro recovered from early losses and moved higher after the dollar tumbled on weaker-than-expected US economic news. The euro is also supported today by higher European government bond yields, which strengthened the euro’s interest rate differentials. Gains in the euro are limited by trade concerns after President Trump threatened to impose tariffs on the Eurozone, which would undercut economic growth and possibly push the Eurozone economy into recession.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.
USD/JPY (^USDJPY) today is unchanged. The yen today recovered from early losses and is unchanged after T-note yields and the dollar declined on weaker-than-expected US economic news. The yen also has support from higher Japanese government bond yields after the 10-year JGB bond yield today rose to a 13-year high of 1.281%, strengthening the yen’s interest rate differentials.
The yen today initially moved lower as an easing of trade war fears curbed safe-haven demand for the yen after the US said it would delay 25% tariffs on Canada and Mexico for a month.
April gold (GCJ25) today is up +14.20 (+0.50%), and March silver (SIH25) closed up +0.549 (+1.69%). Precious metals today are moving higher, with April gold posting a contract high and nearest-futures (G25) posting an all-time high of $2,850.70 an ounce. Silver also posted a 7-week high. Today’s weaker dollar is supportive of metals prices. Also, the action by the US to impose a 10% tariff on Chinese goods and China’s swift retaliation to impose its tariffs on US goods threatens to ignite a trade war that boosted safe-haven demand for precious metals. Gains in precious metals accelerated on today’s weaker-than-expected US JOLTS job openings and factory orders reports, dovish factors for Fed policy.
Gains in precious metals are limited as safe-haven demand for precious metals subsided after the US agreed to delay 25% tariffs on Canada and Mexico for a month. Also, the stabilization of stocks today reduced safe-haven demand for precious metals. Industrial metals prices were undercut after the US imposed a 10% tariff on Chinese goods, and China retaliated with its tariffs on US goods, which could ignite a trade war that derails economic growth and industrial metals demand.
