The dollar index (DXY00) today is down by -0.20% and is just above last Friday's 3-year low. The dollar is posting moderate losses today as a stock rebound has curbed liquidity demand for the dollar. The dollar is also facing a confidence crisis as the US renegotiates its relationships with its trading partners, diminishing its reserve-currency status and prompting some foreign investors to liquidate their dollar assets. The dollar did find some support today on a slight easing of tariff tensions after President Trump excluded most consumer electronics from reciprocal tariffs.
The markets are discounting the chances at 23% 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 down by -0.11% as it consolidates below last Friday's 3-year high. The euro is under pressure today on expectations for the ECB to cut interest rates by 25 bp at Thursday's policy meeting. Losses in the euro are contained on hopes that President Trump's pause on reciprocal tariffs will keep the Eurozone economy from falling into recession and reduce expectations on how much the ECB needs to keep easing monetary policy.
Swaps are discounting the chances at 96% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is down by -0.08%. The yen is modestly higher today and just below last Friday's 6-1/2 month high against the dollar. The yen found support today after Kyodo News reported that Prime Minister Ishiba will request a supplementary budget draft for fiscal 2025 as early as this week in response to President Trump's tariffs and rising prices. Also, higher government bond yields support the yen as the 10-year JGB bond yield climbed to a 1-1/2 week high today at 1.421%. Gains in the yen are limited on reduced safe-haven demand for the yen as stocks rallied after President Trump paused reciprocal tariffs on most consumer electronics.
Japan Feb industrial production was revised downward by -0.2 to 2.3% m/m from the previously reported +2.5% m/m.
June gold (GCM25) today is down -24.80 (-0.76%), and May silver (SIK25) is up +0.110 (+0.34). Precious metals today are mixed, with silver climbing to a 1-week high. Today's weaker dollar is supportive of metals prices. Silver garnered support today after President Trump temporarily paused tariffs on consumer electronics, a positive factor for industrial metals demand. Precious metals also have support as a store of value on expectations for the ECB to cut interest rates by 25 bp at Thursday's policy meeting. Fund buying of gold supports prices after long gold positions in ETFs rose to a 1-1/2 year high last Friday.
The escalation of the US-China trade war is boosting safe-haven demand for precious metals after China last Friday raised tariffs on all US goods to 125% from 84% in retaliation for the US raising tariffs on Chinese goods to 145%. Also, 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.
Gold prices fell back today as tariff concerns temporarily eased after President Trump paused reciprocal tariffs on most consumer electronics. Gains in silver are limited by concern that an escalation of the trade war could derail the global economy and the demand for industrial metals.
