The dollar index (DXY00) today is down by -0.05% and is just above last Friday’s 4-month low. The dollar has fallen for six consecutive sessions and remains under pressure due to the negative impact of US tariffs on the US economy. Also, comment made Sunday from President Trump weighed on the dollar when he said the US economy faces “a period of transition” from his tariff policies. In addition, a slide in T-note yields today has weakened the dollar’s interest rate differentials. The dollar recovered most of its losses after today’s stock slide boosted some liquidity demand for the dollar.
Market attention this week will focus on Wednesday's Feb CPI report (expected to ease to +2.9% y/y from +3.0% y/y in Jan and core CPI is expected to ease to +3.2% y/y from +3.3% y/y in Jan). Also, US trade policies with 25% tariffs on US imports of steel and aluminum are scheduled to take effect on Wednesday. On Thursday, Feb PPI final demand will be released (expected to ease to +3.2% y/y from +3.5% y/y in Jan). On Friday, the University of Michigan Mar consumer sentiment index is expected to fall -1.2 to 63.5. Finally, the markets will also look to 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 +0.05% and is just below last Friday’s 4-month high. Today's dollar weakness is a positive factor for the euro. Also, better-than-expected European confidence and industrial production reports were supportive of the euro. In addition, hawkish comments today from ECB Governing Council member Kazimir gave the euro a boost when he said that risks to inflation remain tilted to the upside.
The Eurozone Mar Sentix investor confidence index rose +9.8 to a 9-month high of -2.9, stronger than expectations of -9.3.
German Jan industrial production rose +2.0% m/m, stronger than expectations of +1.5% m/m and the biggest increase in 5 months.
German trade news was mixed as German Jan exports unexpectedly fell -2.5% m/m versus expectations of a +0.5% m/m increase, the largest decline in 8 months. Conversely, Jan imports rose +1.2% m/m, stronger than expectations of +0.5% m/m.
ECB Governing Council member Kazimir warned that the ECB must remain vigilant as "inflation risks remain tilted to the upside."
Swaps are discounting the chances at 49% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is down by -0.81%. The yen today rallied to a new 5-month high against the dollar. Signs of strong Japanese wage pressures are hawkish for BOJ policy and pushed the 10-year JGB bond yield up to a 16-year high today of 1.584%, strengthening the yen’s interest rate differentials. The yen added to its gains today as T-note yields declined. There is also safe-haven demand for the yen from Japanese investors due to today’s weakness in US stocks.
The Japan Jan leading index CI rose +0.1 to 108.0, weaker than expectations of 108.2.
The Japan Feb eco watchers outlook survey fell -1.4 to a 9-month low of 46.6, weaker than expectations of 47.5.
Japan's full-time base pay in January rose +3.0% y/y, stronger than expectations of +2.9% y/y and the largest advance in 32 years.
April gold (GCJ25) today is down -4.70 (-0.16%), and May silver (SIK25) is down -0.124 (-0.38%). Precious metals prices today are moderately lower. Hawkish comments today from ECB Governing Council member Kazimir undercut precious metals prices when he said the ECB must remain vigilant as "inflation risks remain tilted to the upside. Silver prices are also under pressure today after weaker than expected China Feb CPI and PPI reports signaled slack demand in the economy that is bearish for industrial metals demand. Industrial metals prices are also being undercut by economic concerns due to US tariff policies.
Precious metals have support today from a weaker dollar. Also, today’s slide in T-note yields is a bullish factor for precious metals. In addition, precious metals have ongoing safe-haven demand due to US tariffs and retaliation. Finally, fund buying supports gold prices as long gold positions in ETFs rose to a 15-month high last Friday.
Signs of weak demand in China's economy are weighing on prices and is negative factor for global growth prospects after China Feb CPI fell -0.7% y./y, weaker than expectations of -0.4% y/y and the largest decline in 13 months. Also, Jan PPI fell -2.2% y/y, weaker than expectations of -2.1% y/y.
