Latest news with #Wunsch
Globe and Mail
21-05-2025
- Business
- Globe and Mail
Dollar Remains Weak After US Credit Downgrade
The dollar index (DXY00) today slid to a 1-1/2 week low and is down by -0.15%. The dollar remains under pressure after Moody's Ratings late last Friday downgraded the US government's credit rating from Aaa to Aa1, citing a ballooning budget deficit and fiscal concerns. The downgrade puts the dollar's status as a global reserve currency into question and may prompt some investors to lighten up on their dollar assets. The markets are discounting the chances at 5% for a -25 bp rate cut after the June 17-18 FOMC meeting. EUR/USD (^EURUSD) today is up by +0.17%. The euro today is moving higher due to weakness in the dollar. Gains in the euro are limited after today's news that German April producer prices contracted more than expected, which is a dovish factor for ECB policy. Also, dovish comments from ECB Governing Council members Knot and Wunsch were negative for the euro as they signaled support for additional ECB interest rate cuts. German Apr PPI fell -0.9% y/y, weaker than expectations of -0.6% y/y and the biggest decline in 6 months. ECB Governing Council member Knot said he 'can't rule out' another ECB interest rate cut in June, but it's 'too early' to make decisions without seeing fresh quarterly forecasts. ECB Governing Council member Wunsch said the Eurozone economy may need interest rates at 'mildly supportive' levels to ensure inflation doesn't fall below target after a series of shocks. Swaps are discounting the chances at 93% for a -25 bp rate cut by the ECB at the June 5 policy meeting. USD/JPY (^USDJPY) today is down by -0.16%. The yen today extended Monday's and climbed to a 1-1/2 week high against the dollar. The yen found support today from rising Japanese government bond yields after the 10-year JGB bond yield jumped to a 7-week high of 1.532%. Also, short covering pushed the yen higher today after Japanese Finance Minister Kato said he's arranging a bilateral meeting with US Treasury Secretary Bessent to discuss topics, including foreign exchange, at the Group of Seven meetings this week in Canada. Higher T-note yields today are limiting the upside in the yen. June gold (GCM2 5) today is up +47.50 (+1.47%), and July silver (SIN2 5) is up +0.418 (+1.29%). Precious metals today are sharply higher, with gold climbing to a 1-week high. Dollar weakness is bullish for precious metals after the dollar index fell to a 1-1/2 week low today. Also, last Friday's action by Moody's Ratings to downgrade the US government's credit rating is fueling demand for precious metals as a store of value. In addition, strong gold demand from China is supporting prices after China imported 127.5 MT of gold in April, the most in 11 months. Gains in precious metals accelerated today on dovish comments from ECB Governing Council members Knot and Wunsch, who signaled they support additional ECB interest rate cuts. Finally, geopolitical risks in the Middle East continue to support safe-haven demand for precious metals. Israeli Prime Minister Netanyahu announced an 'unprecedented attack' on Hamas and said Israel would take over the entire Gaza Strip. Also, Israel's airstrikes on Houthi rebels in Yemen continue. Higher global bond yields today are negative for precious metals. Also, fund liquidation of long gold positions continues to weigh on prices due to the easing of US-China trade tensions after China and the US recently agreed to reduce tariffs on each other's goods. Long gold positions in ETFs fell to a 6-week low on Monday.
Globe and Mail
27-03-2025
- Business
- Globe and Mail
Dollar Declines and Gold Jumps to a Record High on US Auto Tariffs
The dollar index (DXY00) Thursday fell by -0.21%. The dollar was under pressure Thursday due to President Trump's announcement Wednesday evening of 25% tariffs on US auto imports, which may undercut US economic growth. The dollar also fell on Thursday's dovish economic news, which showed that US Q4 personal consumption and the Q4 core PCE price index were revised lower. Losses in the dollar were limited by stronger-than-expected US economic news, including the GDP revision, weekly jobless claims, and Feb pending home sales. US weekly initial unemployment claims fell -1,000 to 224,000, showing a slightly stronger labor market than expectations of an increase to 225,000. US Q4 GDP was revised upward by 0.1 to +2.4% (q/q annualized), stronger than expectations of no change at 2.3%. Q4 personal consumption was revised downward to +4.0% from the previously reported +4.2%, and the Q4 core price index was revised lower to +2.6% from the previously reported +2.7%. US Feb pending home sales rose +2.0% m/m, stronger than expectations of +1.0% m/m. The markets will focus on Friday's Feb personal spending report (expected +0.5% m/m) and the Feb personal income report (expected +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. Finally, on Friday, the revised March 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) Thursday rose by +0.40% after recovering from a 3-week low. Short covering emerged in the euro Thursday on hawkish comments from ECB Governing Council member Wunsch, who said the ECB should consider holding interest rates steady at its next meeting due to US trade policy complications. The euro Thursday was undercut by weaker interest rate differentials as the 10-year German bund yield fell to a 3-week low. Eurozone Feb M4 money supply rose +4.0% y/y, stronger than expectations of +3.8% y/y and the fastest pace of increase in 2-1/4 years. ECB Governing Council member Wunsch said the ECB should consider holding interest rates steady at its next meeting due to US trade policy complications. Swaps are discounting the chances at 75% for a -25 bp rate cut by the ECB at the April 17 policy meeting. USD/JPY (^USDJPY) Thursday rose by +0.37%. The yen on Thursday dropped to a 3-1/2 week low against the dollar after President Trump imposed 25% tariffs on US auto imports, which may derail economic growth and keep the BOJ from raising interest rates. Also, higher T-note yields Thursday weighed on the yen. Losses in the yen were limited after the 10-year Japan JGB bond yield rose to a 16-year high Thursday of 1.596%, strengthening the yen's interest rate differentials. April gold (GCJ2 5) Thursday closed up +38.50 (+1.27%), and May silver (SIK2 5) closed up +0.861 (+2.52%). Precious metals settled moderately higher on Thursday, with April gold posting a contract high and nearest-futures (H25) gold posting a record high of $3,071.30 an ounce. Silver also posted a 12-year nearest-futures high. Precious metals jumped Thursday on a weaker dollar and increased safe-haven demand after President Trump expanded tariffs and imposed a 25% tariff on US auto imports. Precious metals also gained after the US 10-year breakeven inflation rate rose to a 1-month high Thursday, boosting demand for precious metals as an inflation hedge. In addition, 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. Higher T-note yields Thursday were bearish for precious metals. Also, hawkish comments from ECB Governing Council member Wunsch weighed on precious metals when he said the ECB should consider holding interest rates steady at its next meeting. In addition, gains in silver are limited as Wednesday's action from President Trump to impose 25% tariffs on US auto imports threatens to spark a trade war that will derail global economic growth and industrial metals demand.
Globe and Mail
27-03-2025
- Business
- Globe and Mail
Dollar Falls as Tariffs Spark Growth Concerns
The dollar index (DXY00) today is down by -0.13%. The dollar is under pressure due to President Trump's announcement Wednesday evening of 25% tariffs on US auto imports, which may undercut US economic growth. The dollar also fell on today's dovish economic news, which showed that US Q4 personal consumption and the Q4 core PCE price index were revised lower. Losses in the dollar were limited by stronger-than-expected US economic news, including the GDP revision, weekly jobless claims, and Feb pending home sales. US weekly initial unemployment claims fell -1,000 to 224,000, showing a slightly stronger labor market than expectations of an increase to 225,000. US Q4 GDP was revised upward by 0.1 to +2.4% (q/q annualized), stronger than expectations of no change at 2.3%. Q4 personal consumption was revised downward to +4.0% from the previously reported +4.2%, and the Q4 core price index was revised lower to +2.6% from the previously reported +2.7%. US Feb pending home sales rose +2.0% m/m, stronger than expectations of +1.0% m/m. The markets will focus on Friday's Feb personal spending report (expected +0.5% m/m) and the Feb personal income report (expected +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. Finally, on Friday, the revised March 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 up by +0.23% after recovering from a 3-week low. Short covering emerged in the euro today on hawkish comments from ECB Governing Council member Wunsch, who said the ECB should consider holding interest rates steady at its next meeting due to US trade policy complications. The euro today was undercut by weaker interest rate differentials as the 10-year German bund yield fell to a 3-week low. Eurozone Feb M4 money supply rose +4.0% y/y, stronger than expectations of +3.8% y/y and the fastest pace of increase in 2-1/4 years. ECB Governing Council member Wunsch said the ECB should consider holding interest rates steady at its next meeting due to US trade policy complications. Swaps are discounting the chances at 75% for a -25 bp rate cut by the ECB at the April 17 policy meeting. USD/JPY (^USDJPY) today is up by +0.22%. The yen today dropped to a 3-1/2 week low against the dollar after President Trump imposed 25% tariffs on US auto imports, which may derail economic growth and keep the BOJ from raising interest rates. Also, higher T-note yields today are weighing on the yen. Losses in the yen are limited after the 10-year Japan JGB bond yield rose to a 16-year high today of 1.596%, strengthening the yen's interest rate differentials. April gold (GCJ2 5) today is up +34.00 (+1.12%), and May silver (SIK2 5) is up +0.478 (+1.40%). Precious metals today are moderately higher, with April gold posting a contract high and nearest-futures (H25) gold posting a record high of $3,061.80 an ounce. Silver also posted a 1-week high. Precious metals jumped today on a weaker dollar and increased safe-haven demand after President Trump expanded tariffs and imposed a 25% tariff on US auto imports. Precious metals also gained after the US 10-year breakeven inflation rate rose to a 1-month high today, boosting demand for precious metals as an inflation hedge. In addition, 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. Higher T-note yields today are bearish for precious metals. Also, hawkish comments from ECB Governing Council member Wunsch weighed on precious metals when he said the ECB should consider holding interest rates steady at its next meeting. In addition, gains in silver are limited as Wednesday's action from President Trump to impose 25% tariffs on US auto imports threatens to spark a trade war that will derail global economic growth and industrial metals demand.
