The dollar index (DXY00) today is down -0.42% at a 4-3/4 month low. The dollar has been under pressure since last week when the US announced tariffs on Canada, China, and Mexico, fueling concerns that a trade war will erupt and derail the economy. The dollar recovered from its worst levels today after US JOLTS Jan job openings rose more than expected. Also, continued weakness in stocks has boosted the liquidity demand for the dollar.
US Jan JOLTS job openings rose +232,000 to 7.74 million, higher than expectations of unchanged at 7.60 million and indicating weaker-than-expected labor market news.
Market attention this week will focus on Wednesday’s Feb US CPI report, which is expected to ease slightly to +2.9% y/y from +3.0% y/y in Jan. The Feb core CPI is expected to ease to +3.2% y/y from +3.3% y/y in Jan. Also, US trade policies will be in focus, with 25% tariffs on US imports of steel and aluminum scheduled to take effect on Wednesday. On Thursday, the Feb final-demand PPI is expected to ease to +3.2% y/y from +3.5% y/y in Jan. On Friday, the University of Michigan’s March consumer sentiment index is expected to fall -1.2 to 63.5. Finally, the markets will also see if Congress can approve a spending bill to avert a government shutdown ahead of a March 15 deadline.
The markets are discounting the chances at 4% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) today is up by +0.73% at a 4-month high. Dollar weakness today is supportive of the euro. The euro also rose today after the leader of Germany’s Green Party said they are ready to negotiate and reach an agreement in a dispute over defense spending with Germany’s prospective ruling coalition led by Chancellor-in-waiting Merz.
Swaps are discounting the chances at 52% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is up by +0.31%. The yen fell back from a 5-1/4 month high against the dollar today and is moderately lower. The yen was undercut by today’s weaker-than-expected Japanese economic news. Also, higher T-note yields today are weighing on the yen.
Japan Jan household spending rose +0.8% y/y, weaker than expectations of +3.7% y/y.
Japan’s Q4 GDP was revised lower to +2.2% (annualized q/q) from the previously reported +2.8%.
Japan Feb machine tool orders rose +3.5% y/y, the fifth consecutive monthly increase.
April gold (GCJ25) today is up +27.00 (+0.93%), and May silver (SIK25) is up +0.735 (+2.26%). Precious metals prices today recovered from overnight losses and are moderately higher. Today’s slump in the dollar index to a 4-3/4 month low is bullish for metals prices. Also, precious metals have ongoing safe-haven demand due to US tariffs and retaliation. Gains in precious metals accelerated today after President Trump ramped up tariffs to 50% on steel and aluminum coming into the US from Canada.
Higher global government bond yields today are bearish for precious metals. Silver prices were weighed down by the downward revision in Japan’s Q4 GDP, a negative factor for industrial metals demand. Silver prices are also under pressure because of concerns that US tariff policies will spark a trade war that derails economic growth and curbs global demand for industrial metals.
