The dollar index (DXY00) today increased by +0.19%. The dollar is rising today as there are doubts about whether the ceasefire in Iran will work in stocks and boost the safe-haven demand for the dollar. Also, today’s drop in weekly US jobless claims to a 1.75-year low is a sign of a strong labor market that is hawkish on Fed policy and supportive of the dollar. In addition, today’s +3% increase in crude oil prices has pushed inflation expectations higher and may prompt the Fed to keep monetary policy tight, a strong factor for the dollar.
The dollar gained support today after Axios reported that the Pentagon is developing military options for a “final strike” on Iran that could include the use of ground forces and a major bombing campaign if there is no progress in diplomatic talks and the Strait of Hormuz remains closed when President Trump’s deadline expires this weekend.
Weekly US jobless claims rose by +5,000 to 210,000, just as expected. Weekly continuous claims fell -32,000 to a 1.75-year low of 1.819 million, reflecting a stronger-than-expected labor market of 1.849 million.
Swaps markets are down 4% 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 -0.16%. The euro is under pressure today from a strong dollar. Also, today’s report showing the German consumer confidence index Apr GfK fell more than expected to a 2-year bearish low for the euro. In addition, the euro is under pressure from today’s +3% jump in crude oil prices, which could weigh on the Eurozone economy which imports most of its energy needs.
Eurozone Feb M3 money supply rose +3.0% y/y, weaker than expected +3.2% y/y.
Germany’s Apr GfK consumer confidence index fell -3.2 to a 2-year low of 28.0, weaker than expected at -27.3.
Swaps discount a 65% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) today is up +0.07%. The yen fell today due to a stronger dollar. The yen is also under pressure today from a +3% rise in crude oil prices, which is not good for the Japanese economy, which imports most of its energy needs. Additionally, high T-note yields today are bearish for the yen. The yen’s losses were limited after Japan’s Feb PPI services prices rose more than expected, a key element of BOJ policy.
In Japan Feb PPI services prices rose +2.7% y/y, stronger than expected +2.6% y/y.
Markets are discounting +66% for a 25 bp BOJ rate hike at the next meeting on April 28th.
April COMEX gold (GCJ26) today decreased -113.10 (-2.48%), while May COMEX silver (SIK26) decreased -3.721 (-5.13%).
Gold and silver prices fell sharply today amid a stronger dollar and higher global bond yields. Also, today’s +3% jump in crude oil prices raises inflation expectations that could keep the world’s major banks pursuing restrictive policies, a low for precious metals. In addition, today’s move by the OECD to raise its forecast for global inflation this year due to the Iran war could prompt central banks to tighten policy, a negative for precious metals.
Precious metals also have safe-haven support amid concerns about an escalation of war in the Middle East. Axios reported today that the Pentagon is developing military options for a “final strike” on Iran that could include the use of ground forces and a large-scale bombing campaign if there is no progress in diplomatic talks with Iran. Also, Saudi Arabia agreed to give US troops access to King Fahd Air Base, while the UAE closed an Iranian-owned hospital and club. Iran’s neighbors in the Middle East are growing frustrated with Iran, which has responded to US and Israeli attacks by striking targets in several nearby countries.
Precious metals continue to see strong safe-haven demand amid the Iran war, which has entered its 25th day. 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.
The latest fund liquidation of precious metals is a bull on prices, as long holdings in gold ETFs fell to a 3.25-month low on Tuesday 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.
The Organization for Economic Cooperation and Development (OECD) raised its G-20 inflation forecast for 2026 to 4.0% from December’s estimate of 2.8%, due to the Iran war.
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
