The dollar index (DXY00) today is down by -0.32%. The dollar gave up an early advance today and turned lower after the University of Michigan March US consumer sentiment index was revised downward to a 2-1/3 year low. Also, today's US economic news showed that Feb personal spending rose less than expected, a negative factor for the dollar. In addition, Thursday evening's comments from Richmond Fed President Barkin weighed on the dollar when he said rapid changes to US trade policy have created "a sense of instability" in the business community, and the associated decline in sentiment could "quiet demand."
The dollar today initially moved higher as trade tensions are weighing on stocks and boosting liquidity demand for the dollar. Also, hawkish comments Thursday evening from Boston Fed President Collins boosted the dollar when said that it looks "inevitable" that tariffs will boost inflation. In addition, the University of Michigan March US inflation expectations indicator was revised higher, a hawkish factor for Fed policy.
US Feb personal spending rose +0.4% m/m, weaker than expectations of +0.5% m/m. Feb personal income rose +0.8% m/m, stronger than expectations of +0.4% m/m and the largest increase in 13 months.
The US Feb core PCE price index rose +0.4% m/m and +2.8% y/y, stronger than expectations of +0.3% m/m and +2.7% y/y.
The University of Michigan March Mar US consumer sentiment index was revised downward by -0.9 to a 2-1/3 year low of 57.0, weaker than expectations of no change at 57.9.
The University of Michigan March US 1-year inflation expectations indicator was revised upward to a 2-1/3 year high of +5.0%, higher than expectations of +4.9%. Also, the March 5-10 year inflation expectations indicator was revised upward to a 32-year high of +4.1% y/y, stronger than expectations of +3.9%.
Boston Fed President Collins said that it looks "inevitable" that tariffs will boost inflation, at least in the near term.
The markets are discounting the chances at 18% for a -25 bp rate cut after the May 6-7 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.25%. Today, the euro recovered from early losses and moved higher after the dollar retreated, which sparked short-covering in the euro. The euro also garnered support after the ECB's Feb 1-year inflation expectations rose more than expected, a hawkish factor for ECB policy.
The euro today initially moved lower after the Eurozone March economic confidence index unexpectedly declined, and the German labor market weakened after the German Mar unemployment rate unexpectedly rose to a 4-1/2 year high. In addition, lower German bund yields have weakened the euro's interest rate differentials after the 10-year German bund yield fell to a 3-week low today of 2.707%.
The Eurozone Mar economic confidence index unexpectedly fell -1.1 to 95.2, weaker than expectations of an increase to 96.7.
The ECB's Feb 1-year inflation expectations indicator was unchanged from Jan at 2.6%, stronger than expectations of 2.5%.
German Mar unemployment rose by +26,000, showing a weaker labor market than expectations of +10,000. The Mar unemployment rate unexpectedly rose +0.1 to a 4-1/2 year high of 6.3%, showing a weaker labor market than expectations of no change at 6.2%.
Swaps are discounting the chances at 85% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is down by -0.71%. The yen today recovered from a 3-1/2 week low against the dollar on signs of faster inflation after the Japan Mar Tokyo CPI rose more than expected, which was hawkish for BOJ policy. Also, today's fall in the Nikkei Stock Index to a 2-week low has boosted safe-haven demand for the yen. Gains in the yen accelerated today when T-note yields slumped after the University of Michigan March US consumer sentiment index fell to a 2-1/3 year low.
Japan Mar Tokyo CPI rose +2.9% y/y, stronger than expectations of +2.7% y/y. Also, Mar Tokyo CPI ex-fresh food and energy rose +2.2% y/y, stronger than expectations +1.9% y/y, and the largest increase in a year.
April gold (GCJ25) today is up +25.20 (+0.82%), and May silver (SIK25) is up +0.107 (+0.30%). Precious metals are climbing today, with April gold posting a record nearest-futures high of $3,094.90 an ounce. Silver also posted a 13-year nearest-futures high. Trade war concerns continue to fuel safe-haven demand for precious metals after President Trump late Wednesday announced a 25% tariff on US auto imports. Also, lower global bond yields today are supportive of precious metals. In addition, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as Israel continues airstrikes across Gaza, ending a two-month ceasefire with Hamas, and as the US continues to launch strikes on Yemen's Houthi rebels. Silver also has support on concern about retaliatory tariffs on silver exports from Canada and Mexico, where the US gets 70% of its silver.
Today's US economic news showed that the Feb core PCE price index rose more than expected, and the University of Michigan US Mar inflation expectations indicator was revised higher, hawkish factors for Fed policy and bearish for precious metals. Also, hawkish comments from Boston Fed President Collins were negative for precious metals when she said that it looks "inevitable" that tariffs will boost inflation, at least in the near term. Gains in silver are limited as Wednesday's action by President Trump to impose 25% tariffs on US auto imports threatens to spark a trade war that could derail global economic growth and industrial metals demand.
