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Globe and Mail
05-05-2025
- Business
- Globe and Mail
Dollar Retreats on Economic Uncertainty
The dollar index (DXY00) Monday fell by -0.52%. The dollar today gave up an early advance and turned lower on economic concerns after the Apr Dallas Fed manufacturing survey of general business activity index fell more than expected to a 5-year low. The dollar is also under pressure on concerns that the US-China trade war could drag on and weigh on US growth prospects after President Trump said the US would not lower tariffs on China unless 'they give us something substantial.' In addition, Monday's fall in the 10-year T-note yield to a 2-1/2 week low weakened the dollar's interest rate differentials. The dollar on Monday initially moved higher on comments from US Treasury Secretary Bessent, who said the US is working on bilateral trade deals with 17 key trading partners, not including China. The US Apr Dallas Fed manufacturing survey of general business activity index fell -19.5 points to a 5-year low of -35.8, weaker than expectations of -17.0. The markets are discounting the chances at 9% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week. EUR/USD (^EURUSD) Monday rose by +0.49%. The euro on Monday recovered from early losses and moved higher after the dollar weakened. The euro initially moved lower Monday on some dovish ECB comments. ECB Governing Council member Villeroy de Galhau said the ECB has room to cut interest rates, and ECB Governing Council member Rehn said he sees downside risks in the ECB's March inflation forecasts. ECB Governing Council member Villeroy de Galhau said the ECB has room to lower interest rates as the trade war triggered by US tariffs will weigh on the global economy but won't affect the inflation trend in Europe. ECB Governing Council member Rehn said that due to the fallout from US tariffs, 'I find it reasonable to assume that there are downside risks to the inflation outlook in the ECB's March projections.' Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the June 5 policy meeting. USD/JPY (^USDJPY) Monday fell by -1.11%. The yen rallied on Monday due to short covering ahead of Thursday's BOJ policy meeting. Also, lower T-note yields on Monday were supportive of the yen. On the negative side, Monday's rally in the Nikkei Stock Index to a 4-week high reduced safe-haven demand for the yen. In addition, Monday's statement from the BOJ that it will purchase government bonds in May at the same pace as April was bearish for the yen as it damped speculation the BOJ, in a hawkish move, would cut its bond purchases. June gold (GCM2 5) Monday closed up +49.30 (+1.49%), and May silver (SIK2 5) closed down -0.005 (-0.02%). Precious metals prices on Monday settled mixed. Monday's weaker dollar and lower T-note yields supported precious metals prices. Gold also rallied Monday on dovish ECB comments. ECB Governing Council member Villeroy de Galhau said the ECB has room to lower interest rates, and ECB Governing Council member Rehn said there are downside risks to the ECB's March inflation outlook. Concern the US-China trade war will persist and undercut global economic growth is boosting safe-haven demand for gold and undercutting silver after President Trump said the US would not lower tariffs on China unless 'they give us something substantial.' Geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as the Israel-Hamas and the US-Houthi conflicts continue.
Irish Times
29-04-2025
- Business
- Irish Times
Further ECB rate cut in June all but guaranteed
The fear that lingering inflation in the services sector may force the European Central Bank (ECB) to keep interest rates higher for longer has all but been extinguished by Trump's tariff agenda. 'There won't be extra inflation. That is a strong guarantee – neither this year nor next year,' says ECB governing council member François Villeroy de Galhau. Trump's increasingly protectionist trade policy (apart from the violent stock market swings) has weakened the dollar and strengthened the euro in the process. This (combined with falling energy prices, also a product of Trump's trade policy) is already having a disinflationary impact on the euro zone economy. READ MORE Hence worries we would see a second surge in inflation have receded. 'Our objective with the ECB is around 2 per cent inflation,' says Villeroy de Galhau. 'We are almost there at 2.2 per cent and should meet the objective. And that means something important: we still have a gradual margin for interest rate cuts.' The ECB is expected to again lower interest rates in June with the incoming shock from tariffs now the chief focus. But Villeroy de Galhau's 'we have margin for a cut' sentiment might morph into something more urgent if the fallout from tariffs proves stronger than expected and the already flagging euro zone economy falls back into flatline mode as a result of the hit to global trade. Last week, the International Monetary Fund (IMF) downgraded its euro-zone growth forecast to 0.8 per cent this year, down from 1 per cent. But the fallout from Washington's protectionist shift combined with the uncertainty factor (which has prompted a pause in investment) is hard to predict, and no one quite has a handle on it. An article in the Financial Times highlighted the looming impact on the US economy, with container-port operators and air-freight managers reporting sharp declines in goods transported from China. Logistics groups say container bookings to the US have fallen sharply since the introduction of 145 per cent tariffs on Chinese imports to the US. The Port of Los Angeles, the main route of entry for goods from China, expects scheduled arrivals in the week starting May 4th to be a third lower than a year before. The potential hit to growth from tariffs and trade wars is only emerging.
Globe and Mail
26-03-2025
- Business
- Globe and Mail
Dollar Supported by Higher Bond Yields and Hawkish Fed Comments
The dollar index (DXY00) today is up by +0.19% on support from higher T-note yields. Also, hawkish comments today from Chicago Fed President Goolsbee boosted the dollar when he said the next Fed rate cut may take longer than anticipated because of economic uncertainty. In addition, weakness in the British pound benefits the dollar after weaker-than-expected UK Feb CPI knocked GBP/USD down to a 2-week low. Gains in the dollar are limited after US Feb core capital goods new orders unexpectedly declined. US MBA mortgage applications fell -2.0% in the week ended March 21, with the purchase mortgage sub-index up +0.7% and the refinancing mortgage sub-index down -5.3%. The average 30-year fixed rate mortgage fell -1 bp to 6.71% from 6.72% in the prior week. US Feb capital goods new orders (core) nondefense ex-aircraft and parts unexpectedly fell -0.3% m/m, weaker than expectations of +0.2% m/m and the biggest decline in 7 months. The markets are on guard for any weakness in corporate capital spending due to tariffs and economic uncertainty. Chicago Fed President Goolsbee said the Fed is no longer on the 'golden path' witnessed in 2023 and 2024, and the next Fed rate cut may take longer than anticipated because of economic uncertainty. This week's attention will focus on Thursday's report on Q4 GDP (expected to be unrevised at +2.3% q/q annualized and Mar pending home sales (expected +1.0% m/m). On Friday, Feb personal spending is expected to rise +0.5% m/m, and Feb personal income is expected to rise +0.4% m/m. Also, the Feb core PCE price index, the Fed's preferred inflation gauge, is expected to rise +0.3% m/m and +2.7% y/y. On Friday, the revised Mar University of Michigan US consumer sentiment index is expected to remain unchanged at 57.9. The markets are discounting the chances at 16% for a -25 bp rate cut after the May 6-7 FOMC meeting. EUR/USD (^EURUSD) today is down by -0.03%. Today's stronger dollar is weighing on the euro. Also, dovish comments today from ECB Governing Council member Villeroy de Galhau undercut the euro when he said the ECB can still cut interest rates as it has almost achieved its aim of bringing inflation back to the 2% objective. Swaps are discounting the chances at 73% for a -25 bp rate cut by the ECB at the April 17 policy meeting. USD/JPY (^USDJPY) today is up by +0.34%. The yen is moderately lower today, weighed down by higher T-note yields. Also, easing price pressures are dovish for BOJ policy and negative for the yen after Japan's Feb PPI services prices rose less than expected. In addition, the yen weakened on comments from BOJ Governor Ueda, who said the BOJ's price projections will not be met until the second half of the fiscal year, signaling the BOJ will not raise interest rates in the near term. Losses in the yen are limited after the 10-year Japan JGB bond yield rose to a 16-year high today of 1.593%, strengthening the yen's interest rate differentials. The Japan Jan leading index CI was revised upward by +0.3 to 108.3 from the previously reported 108.0. Japan Feb PPI services prices rose +3.0% y/y, weaker than expectations of +3.1% y/y. BOJ Governor Ueda said, 'Our projection is that the underlying price trend will broadly reach 2% in the second half of our outlook period,' signaling the BOJ will keep monetary policy steady in the near term. April gold (GCJ2 5) today is down -3.00 (-0.10%), and May silver (SIK2 5) is down -0.027 (-0.08%). Precious metals today gave up early gains and turned slightly lower. Today's stronger dollar is bearish for precious metals. Also, higher global bond yields today are negative for precious metals. In addition, hawkish comments today from Chicago Fed President Goolsbee weighed on precious metals when he said the next Fed rate cut may take longer than anticipated because of economic uncertainty. Precious metals have support today as an inflation hedge after the US 10-year breakeven inflation rate rose to a 3-week high. Also, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as Israel continues 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, fund buying of gold supports prices after long gold positions in ETFs rose to a 17-month high Tuesday. Silver prices have carryover support from today's rally in copper prices to a 10-month high after President Trump's threats to raise tariffs on US copper imports by 25%.
Globe and Mail
25-03-2025
- Business
- Globe and Mail
Dollar Edges Lower on Waning US Consumer Confidence
The dollar index (DXY00) on Tuesday fell by -0.10%. The dollar Tuesday fell from a 2-1/2 week high and posted modest losses. The dollar is also under pressure on reports that US reciprocal tariffs scheduled to be imposed on April 2 would be more targeted than widespread tariffs originally threatened, easing inflation concerns that could allow the Fed to keep cutting interest rates. The dollar remained lower on US economic news that showed Mar consumer confidence fell to a 4-year low, and Feb new home sales rose less than expected. Hawkish comments from Fed Governor Kugler limited losses in the dollar when she said she supports holding interest rates steady for "some time." The US Jan S&P CoreLogic composite-20 home price index rose +4.67% y/y, below expectations of +4.80% y/y but the fastest pace of increase in 5 months. US Feb new home sales rose +1.8% m/m to 676,000, weaker than expectations of 680,000. The Conference Board's US Mar consumer confidence index fell -7.2 to a 4-year low of 92.9, weaker than expectations of 94.0. The US Mar Richmond Fed manufacturing survey of current conditions fell -10 to -4, weaker than expectations of 1. Fed Governor Kugler said she is "paying close attention to the acceleration of price increases and higher inflation expectations, especially given the recent bout of inflation in the past few years," and she supports holding interest rates steady for "some time." This week's attention will focus on Wednesday's report on Feb capital goods new orders nondefense ex-aircraft and parts (expected +0.2% m/m). On Thursday, Q4 GDP is expected to be unrevised at +2.3% (q/q annualized), and Mar pending home sales are expected +1.0% m/m. On Friday, Feb personal spending is expected +0.5% m/m, and Feb personal income is expected +0.4% m/m. Also, the Feb core PCE price index, the Fed's preferred inflation gauge, is expected +0.3% m/m and +2.7% y/y. Finally, on Friday, the revised Mar University of Michigan consumer sentiment index is expected to remain unchanged at 57.9. The markets are discounting the chances at 16% for a -25 bp rate cut after the May 6-7 FOMC meeting. EUR/USD (^EURUSD) Tuesday fell by -0.07%. The euro gave up an early advance Tuesday and fell to a 2-1/2 week low on dovish comments from ECB Governing Council member Villeroy de Galhau, who said the disinflation trend in Europe is "solid" and the ECB has scope for further interest rate cuts. The euro Tuesday initially moved higher and garnered support after the German Mar IFO business climate survey rose to an 8-month high. Also, hawkish comments Tuesday from ECB Governing Council members Kazimir and Muller boosted the euro when they said they could not rule out a pause to the ECB's interest rate cuts. Eurozone Feb new car registrations fell -3.4% y/y to 854,000 units, the largest decline in 5 months. The German Mar IFO business climate survey rose +1.4 to an 8-month high of 86.7, right on expectations. ECB Governing Council member Villeroy de Galhau said the ECB has scope for further interest rate cuts due to a "solid trend" of disinflation in Europe. ECB Governing Council member Kazimir said the ECB "is already now in the neutral rate zone," and he can't rule out a pause in interest rate cuts. ECB Governing Council member Muller said he "can't rule out a pause in the ECB's rate cutting," and any further rate cuts will depend on the nature of the tariffs that the US is due to announce soon. Swaps are discounting the chances at 69% for a -25 bp rate cut by the ECB at the April 17 policy meeting. USD/JPY (^USDJPY) Tuesday fell by -0.53%. The yen recovered from a 3-week low against the dollar Tuesday and posted moderate gains. Higher Japanese government bond yields have strengthened the yen's interest rate differentials and are supporting the yen after the 10-year JGB bond yield climbed to a 16-year high Tuesday of 1.587%. Gains in the yen accelerated after T-note yields gave up an early advance and turned lower. April gold (GCJ2 5) Tuesday closed up +10.30 (+0.34%), and May silver (SIK2 5) closed up +0.737 (+2.20%). Precious metals settled moderately higher on Tuesday due to a weaker dollar. Precious metals also have support on hopes that US reciprocal tariffs scheduled for April 2 would be more targeted than previously expected, which eases concerns about inflation and could allow the Fed to keep cutting interest rates, a dovish factor for precious metal. Tuesday's slump in US March consumer confidence to a 4-year low is a dovish factor for Fed policy and bullish for precious metals. Ramped-up geopolitical risks in the Middle East are also boosting safe-haven demand for precious metals as Israel continues 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, fund buying of gold supports prices after long gold positions in ETFs rose to a 17-month high Monday. Hawkish central bank comments Tuesday were bearish for precious metals. Fed Governor Kugler said she supports holding interest rates steady for "some time." Also, ECB Governing Council members Kazimir and Muller said they cannot rule out a pause in the ECB's interest rate cuts.
Globe and Mail
20-03-2025
- Business
- Globe and Mail
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.
