The dollar index (DXY00) Thursday fell by -0.49%. The dollar posted moderate losses Thursday because of concerns that the US-China trade war will drag on after China said there were no talks on reaching a trade deal with the US. Also, Treasury Secretary Bessent said President Trump hasn't offered to take down US tariffs on China on a unilateral basis. The dollar added to its losses Thursday based on dovish Fed comments. Cleveland Fed President Hammack said the Fed could interest rates in June if the data is clear, and Fed Governor Waller said he'd support Fed rate cuts if tariffs led to job losses. Thursday's US economic news was mixed for the dollar.
US weekly initial unemployment claims rose +6,000 to 222,000, right on expectations. Weekly continuing claims fell -37,000 to a 10-week low of 1.841 million, showing a stronger labor market than expectations of 1.869 million.
US Mar capital goods new orders nondefense ex-aircraft and parts rose +0.1% m/m, right on expectations.
The US Mar Chicago Fed national activity index fell -0.27 to -0.03, weaker than expectations of 0.12.
US Mar existing home sales fell -5.9% m/m to a 6-month low of 4.02 million, weaker than expectations of 4.13 million.
China's Commerce Ministry said the US should revoke all unilateral tariffs and "show sincerity" if it wants to make a trade deal, and "any reports on development in trade talks are groundless."
Cleveland Fed President Hammack ruled out a Fed rate cut at that May 6-7 FOMC meeting but said, "If we have clear and convincing data by June, I think you'll see the committee move if we know which is the right way to move at that point in time."
Fed Governor Waller said, "If we see a significant drop in the labor market due to aggressive tariff levels, then I think it's important that we step in" and lower interest rates.
The markets are discounting the chances at 8% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week.
EUR/USD (^EURUSD) Thursday rose by +0.64%. The euro rose moderately Thursday due to weakness in the dollar after China said there were no talks on reaching a trade deal with the US. The euro also garnered support Thursday after the German Apr IFO business confidence index unexpectedly rose to a 9-month high. The euro fell back from its best level after ECB Governing Council member Rehn said the ECB would probably have to lower interest rates further.
Eurozone Mar new car registrations fell -0.2% y/y to 1.030 million units, the third consecutive monthly decline.
The German Apr IFO business confidence index unexpectedly rose +0.2 to a 9-month high of 86.9, stronger than expectations of a decline to 85.2.
ECB Governing Council member Rehn said the ECB would probably have to lower interest rates further and shouldn't exclude a larger reduction than 25 bp.
Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at the June 5 policy meeting.
USD/JPY (^USDJPY) Thursday fell by -0.59%. The yen strengthened against the dollar Thursday on increased demand for the yen as a safe haven on concern the US-China trade war will drag on after China said there were no talks on reaching a trade deal with the US. Also, Thursday's news that showed Japanese March PPI service prices rose more than expected was hawkish for BOJ policy and supportive of the yen. In addition, lower T-note yields on Thursday were bullish for the yen.
Japan Mar PPI services prices rose +3.1% y/y, stronger than expectations of +3.0% y/y.
June gold (GCM25) Thursday closed up +54.50 (+1.65%), and May silver (SIK25) closed down -0.044 (-0.13%). Precious metals prices on Thursday settled mixed. Thursday's weaker dollar is bullish for precious metals. Also, doubts that the US-China trade war will be resolved anytime soon are boosting safe-haven demand for gold after Treasury Secretary Bessent said President Trump hasn't offered to take down US tariffs on China on a unilateral basis. Lower global bond yields Thursday are supportive of precious metals. In addition, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as the Israel-Hamas and the US-Houthi conflicts continue.
Silver prices were under pressure Thursday because of concerns that the US-China trade war will drag on, curb economic growth, and reduce demand for industrial metals. Also, Thursday's larger-than-expected decline in US March existing home sales to a 6-month low was negative for industrial metals demand.
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.
