The dollar index (DXY00) today is up by +0.14% and climbed to a 2-week high. The weakness in stocks today has boosted liquidity demand for the dollar. Hawkish comments today from New York Fed President Williams and Chicago Fed President Goolsbee were positive for the dollar when they signaled their support for steady Fed policy. Today’s decline in T-note yields has weakened the dollar’s interest rate differentials and is limiting gains in the dollar.
New York Fed President Williams said, “The current modestly restrictive stance of the Fed’s monetary policy is entirely appropriate given the solid labor market and inflation still running somewhat above our 2% goal.”
Chicago Fed President Goolsbee signaled he favors steady Fed policy when he said there’s a lot of strength in the hard economic data and the Fed needs to be a steady hand and take the long view.
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 down by -0.18%. Today, the euro is under pressure from a stronger dollar. Also, concerns about trade tariffs and their possible negative effects on the Eurozone economy are undercutting the euro.
Swaps are discounting the chances at 59% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is up by +0.07%. Today, the yen gave up overnight gains and turned modestly lower on concerns that US tariffs will derail the global economy and keep the BOJ from raising interest rates. The yen initially moved higher today after Japan’s Feb national CPI rose more than expected, a hawkish factor for BOJ policy. Today’s decline in T-note yields is also supportive of the yen.
Japan’s Feb national CPI rose +3.7% y/y, stronger than expectations of +3.5% y/y. Feb national CPI ex-fresh food and energy rose +2.6% y/y, right on expectations and the strongest pace of increase in 11 months.
April gold (GCJ25) today is down -33.80 (-1.11%), and May silver (SIK25) is down -0.686 (-2.02%). Precious metals today are moderately lower, with silver falling to a 1-1/2 week low. Today’s rally in the dollar index to a 2-week high has sparked long liquidation in precious metals. Also, hawkish comments today from New York Fed President Williams and Chicago Fed President Goolsbee undercut precious metals when they signaled their support for steady Fed policy. Silver prices are under pressure on concerns that US trade policies will undercut economic growth, reducing demand for industrial metals.
Concerns about the potential impacts of US tariffs on global economic growth support the safe-haven demand for precious metals. Lower T-note yields today are also bullish for precious metals. Ramped-up geopolitical risks in the Middle East Precious are boosting safe-haven demand for precious metals after Israel this week launched a series of airstrikes across Gaza, ending a two-month ceasefire with Hamas, and as the US continues to launch strikes on Yemen’s Houthi rebels. In addition, today’s stock weakness has increased safe-haven demand for precious metals.
