The dollar index (DXY00) today is down -0.94% and fell to a new 3-year low. The dollar is selling off today on a renewed crisis of confidence in the dollar after National Economic Council Director Hassett said President Trump was contemplating the possibility of firing Fed Chair Powell. The firing of Powell would question the independence of the Fed and further reduce confidence in the dollar, which is already under pressure from President Trump's aggressive trade tariffs that have prompted foreign investors to liquidate their dollar assets. The dollar held its losses after US Mar leading indicators posted their largest decline in 17 months.
US Mar leading indicators fell -0.7% m/m, weaker than expectations of -0.5% m/m and the largest decline in 17 months.
This week's market focus will be on any changes to US trade policies. On Wednesday, March new home sales are expected to climb +0.7% m/m to 681,000. The Fed Beige Book will also be released on Wednesday. Thursday brings March capital goods new orders nondefense ex-aircraft and parts (expected +0.1% m/m). Also, March existing home sales on Thursday are expected to fall -2.8% m/m to 4.14 million. Friday brings the revised University of Michigan April consumer sentiment index (expected no change at 50.8).
The markets are discounting the chances at 14% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week.
EUR/USD (^EURUSD) today is up by +1.04% at a 3-1/3 year high. Today's selloff in the dollar is benefiting the euro. Also, hawkish comments today from ECB Governing Council member Muller boosted the euro when he warned that US trade tariffs and higher public spending in Germany could stoke inflation. Moves in EUR/USD may be exaggerated today as trading activity is well below average, with most European markets closed for the Easter Monday holiday.
Swaps are discounting the chances at 92% for a -25 bp rate cut by the ECB at the June 5 policy meeting.
USD/JPY (^USDJPY) today is down by -1.12%. The yen today rallied to a 7-month high against the dollar as a confidence crisis in the dollar has sparked safe-haven buying of the yen. The dollar is sinking on questions about the Fed's independence with President Trump seeking to fire Fed Chair Powell. The yen also has support from a Bloomberg report that said BOJ policymakers see little need to change their existing stance of gradually raising interest rates.
A report from Bloomberg said BOJ officials see little need to change their existing stance of gradually raising interest rates for now despite uncertainties stemming from US tariffs.
June gold (GCM25) today is up +108.40 (+3.26%), and May silver (SIK25) is up +0.345 (+1.065%). Precious metals are climbing today, with June gold soaring to a contract high and nearest-futures (J25) gold posting a new record high of $3,418.50 an ounce. Today's slump in the dollar index to a 3-year low is a major bullish factor for precious metals. Also, a crisis of confidence in dollar assets has boosted demand for precious metals as a store of value, with President Trump threatening to fire Fed Chair Powell. In addition, the ongoing US-China trade war is fueling safe-haven demand for precious metals. Finally, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals after the Israel-Hamas ceasefire broke down and as the US continues strikes on Yemen's Houthi rebels.
Higher T-note yields today are bearish for precious metals. Also, today's report from Bloomberg said BOJ policymakers see little need to change their existing stance of gradually raising interest rates, which is negative for precious metals. Gains in silver are limited due to concerns the ongoing US-China trade war will slow economic growth and demand for industrial metals.
