The dollar index (DXY00) today increased by +0.38%. The dollar is moving higher today as the ongoing war with Iran drags on, increasing demand for the safe-haven dollar. Also, today’s jump to +3% in crude oil prices could increase inflation and prompt the Fed to tighten monetary policy, something that supports the dollar. The dollar added to its gains after Mar S&P manufacturing PMI rose unexpectedly.
US Q4 nonfarm production was left unchanged at +1.8%, but Q4 unit costs were revised higher to +4.4% from +2.8%, stronger than expectations of +3.6%.
The US rose +0.8 to 52.4, a stronger than expected drop to 51.5.
The US Mar Richmond Fed manufacturing survey of current conditions rose +10 to a 13-month high of 0, better than expectations of 8.
Swaps markets are down 8% with a +25 bp rate hike at the April 28-29 FOMC meeting.
The dollar continues to be bullish on the poor outlook for interest rate differentials, with the FOMC expected to cut interest rates by at least -25 bp in 2026, while the BOJ and ECB are expected to raise rates by at least +25 bp in 2026.
EUR/USD (^EURUSD) today fell by -0.19%. The euro is under pressure today from a strong dollar. Also, today’s jump of +3% in crude oil prices is not good for the Eurozone economy and the euro, as Europe imports most of its energy needs. The euro’s losses were limited after the Eurozone Mar S&P manufacturing PMI unexpectedly expanded at the fastest pace in 3.75 years.
The Eurozone Mar S&P manufacturing PMI unexpectedly rose +0.6 to 51.4, a stronger than expected drop to 49.6 and the strongest pace of expansion in 3.75 years. The Mar S&P composite PMI fell -1.4 to a 10-month low of 50.5, weaker than expectations of 51.0.
Eurozone Feb new car registrations rose +1.4% year-on-year to 865,000.
ECB Governing Council member Boris Vujcic, who will become ECB Vice-President in June, said the ECB must be “very quick and cautious” to maintain inflation as the war in Iran brings risks of inflation closer.
Swaps discount a 71% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) today is up +0.15%. The yen is under pressure today from a stronger dollar. Also, today’s Japanese economic news weighed on the yen after Feb National CPI rose less than expected and Mar S&P manufacturing PMI declined, both of which were BOJ policy. The yen stayed low as T-note yields rose.
Japan’s national CPI for Feb rose +1.3% year-on-year, weaker than expected +1.5% year-on-year and the slowest pace of growth in nearly 4 years. February’s national CPI for fresh food and energy rose +2.5% y/y, weaker than expectations of +2.6% y/y and the slowest pace of increase in 13 months.
Japan Mar S&P manufacturing PMI fell by -1.6 to 51.4.
Markets are discounting a +61% BOJ rate hike of 25 bp at the next meeting on April 28.
April COMEX gold (GCJ26) today decreased -11.70 (-0.27%), while May COMEX silver (SIK26) decreased -0.515 (-0.74%).
Gold and silver prices are falling today due to a strong dollar. Also, the rise in T-note yields today is bearish for precious metals. In addition, today’s +3% jump in WTI crude oil prices may increase inflation and prompt the world’s central banks to tighten monetary policy, which is a strong asset for precious metals. Gold prices added to their losses today after Turkey said it may use its 135 billion gold reserves to prop up the sinking lira.
Precious metals continue to see strong safe haven demand amid the Iran war. Also, uncertainty about US taxes, US political turmoil, large US deficit, and uncertainty of government policy are increasing the demand for precious metals as a store of value.
Recent precious metals fund closings are bearish on prices, as long holdings in gold ETFs fell to a 3-month low on Monday after hitting a 3.5-year high on February 27. Also, long holdings in silver ETFs fell to a 6.25-month low last Friday after hitting a 3.5-year high on December 23.
Strong central bank demand for gold is supporting gold prices, following recent news that China’s PBOC’s PBOC reserves increased by +40,000 to 74.19 million troy ounces in January, the fifteenth month in a row that the PBOC has increased its gold reserves.
As of the date of publication, Rich Asplund did not have (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
