Dollar Gains on Solid US Economic News
The dollar index (DXY00) today is up by +0.52%. The dollar is climbing today on concerns that US trade policies will keep inflation elevated and dissuade the Fed from lowering interest rates. The dollar added to its gains on signs of strength in the US economy after weekly jobless claims rose less than expected, the Mar Philadelphia Fed business outlook survey fell less than expected, and Feb existing home sales unexpectedly rose.
US weekly initial unemployment claims rose +3,000 to 223,000, showing a slightly stronger labor market than expectations of 224,000.
The US Mar Philadelphia Fed business outlook survey fell -5.6 to 12.5, stronger than expectations of 9.0.
US Feb existing home sales unexpectedly rose +4.2% m/m to 4.26 million, stronger than expectations of 3.95 million.
US Feb leading economic indicators fell -0.3% m/m, weaker than expectations of -0.2% m/m.
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 -0.68% at a 1-1/2 week low. Today's dollar strength is weighing on the euro. Also, easing price pressures in the Eurozone may allow the ECB to keep cutting interest rates, a bearish factor for the euro, after the German Feb PPI rose less than expected. Losses in the euro accelerated today based on dovish comments from ECB Governing Council member Villeroy de Galhau, who said the ECB has room to cut interest rates further.
German Feb PPI fell -0.2% m/m and rose +0.7% y/y, weaker than expectations of +0.2% m/m and +1.0% y/y.
ECB President Lagarde said while the process of disinflation remains "well on track," the ECB is unable to make firm commitments on interest rates due to elevated unpredictability over trade.
ECB Governing Council member Villeroy de Galhau said he's "not worried about inflation in Europe," and the ECB has room to cut interest rates further.
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 +0.10%. The yen is under pressure today from a stronger dollar as better-than-expected US economic news supports gains in the dollar. Losses in the yen are limited as short covering in the yen supports prices ahead of Friday's monthly report on Japan's national CPI. Trading activity is well below average in the yen today with markets closed in Japan for the Vernal Equinox Day holiday.
April gold (GCJ2 5) today is down -0.90 (-0.03%), and May silver (SIK2 5) is down -0.240 (-0.70%). Precious metals today are under pressure from a stronger dollar. Also, strength in stocks today has reduced safe-haven demand for precious metals. Silver prices are under pressure after the FOMC Wednesday cut its US 2025 GDP forecast, a bearish factor for industrial metals demand. Also, concerns that US trade policies will undercut economic growth that reduces demand for industrial metals are negative for silver prices.
Losses in precious metals are limited due to carryover support from Wednesday when the FOMC kept interest rates unchanged but projected two 25 bp rate cuts by the end of the year. The FOMC also said it would slow the pace of runoff of its balance sheet starting next month, a bullish factor for precious metals. Lower global government bond yields today are supportive of precious metals. Ramped-up geopolitical risks in the Middle East Precious are also 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 after the US launched strikes on Yemen's Houthi rebels. In addition, the ongoing trade war has boosted the safe-haven demand for precious metals.
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