The dollar index (DXY00) this morning is down by -0.28% at a 2-week low. The dollar has a negative carryover from Wednesday when Fed Chair Powell stated it will be appropriate for the Fed to cut interest rates “at some point this year.” Losses in the dollar accelerated today after US weekly jobless claims rose more than expected to a 2-month high, a dovish factor for Fed policy. Also, today’s strength in stocks is curbing liquidity demand for the dollar. In addition, the jump in the US Feb trade deficit to a 10-month high is bearish for the dollar.
US weekly initial unemployment claims rose +9,000 to a 2-month high of 221,000, showing a weaker labor market than expectations of 214,000.
The US Feb trade deficit of -$68.9 billion was wider than expectations of -$67.6 billion and was the largest deficit in 10 months, a negative factor for Q1 GDP.
The markets are discounting the chances for a -25 bp rate cut at 7% for the next FOMC meeting on April 30-May 1 and 66% for the following meeting on June 11-12.
EUR/USD (^EURUSD) today is up by +0.33% at a 2-week high. Weakness in the dollar today is supportive of the euro. Also, an upward revision in the Eurozone Mar S&P Composite PMI to a 10-month high is bullish for EUR/USD.
On the negative side for the euro was today’s Eurozone PPI report that showed producer prices declining at a faster pace than in January, a dovish factor for ECB policy. Also, today’s account of the Mar 6-7 ECB meeting was dovish and negative for the euro.
The Eurozone Mar S&P Composite PMI was revised upward by +0.4 to 50.3 from 49.9, the strongest pace of expansion in 10 months.
Eurozone Feb PPI fell -1.0% m/m and -8.3% y/y, weaker than Jan’s -0.9% m/m and -8.0% y/y.
In the account of the March 6-7 ECB meeting, ECB officials said, "While it was wise to await incoming data and evidence, the case for considering rate cuts was strengthening," and the date of a first rate-cut is now "coming more clearly into view."
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 9% for its next meeting on April 11 and 98% for the following meeting on June 6.
USD/JPY (^USDJPY) today is down by -0.09%. The yen recovered from overnight losses today and is slightly higher as T-note yields turned lower and boosted the yen. The yen today was initially under pressure from the BOJ’s quarterly economic report where the BOJ downgraded their economic assessment for seven of nine Japanese regions, the most downgrades in two years.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 0% for the April 26 meeting and 10% for the following meeting on June 14.
June gold (GCM4) this morning is down -3.8 (-0.16%), and May silver (SIK24) is down -0.020 (-0.07%). Precious metals this morning are slightly lower. Strength in stocks today has curbed safe-haven demand for precious metals and sparked some long liquidation in gold and silver after gold prices surged to a record high Wednesday and silver soared to a 2-year high. Also, position squaring and long liquidation ahead of Friday’s monthly US payrolls report is undercutting precious metals prices.
Metals are seeing underlying support as the dollar index today fell to a 2-week low. Also, geopolitical risks are boosting safe-haven demand for precious metals after Iran threatened retaliation against Israel for launching airstrikes on Iranian military officials in Syria last Friday. Lower global bond yields today are supportive of precious metals. Fund buying of silver underpins silver prices after long silver holdings in ETFs rose to a 6-month high Wednesday.
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.
