The dollar index (DXY00) today is down by -0.04%. The dollar is under pressure today on concerns that the lingering Iran war could lead to a spike in energy prices that derail the economy. Losses in the dollar are limited after US Feb capital goods new orders nondefense ex-aircraft and parts rose more than expected. Also, today’s stock weakness has boosted liquidity demand for the dollar.
The markets are watching for any sign of a breakthrough amid a flurry of diplomacy before President Trump’s 8 pm EST deadline tonight. Mr. Trump insists any deal must ensure uninterrupted transit through the Strait of Hormuz or he will destroy Iran’s bridges and power plants if no accord is reached. Axios reported that the US conducted strikes on military targets on Kharg Island today, and Israel told Iranians to refrain from using their country’s railway network. Also, Iran pressed on with attacks across the Persian Gulf, dimming chances for peace.
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US Feb capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.6% m/m, stronger than expectations of +0.5% m/m.
Dovish comments today from New York Fed President John Williams were negative for the dollar, as he said the outlook for underlying price pressures in the US was largely unchanged, despite his expectation that higher energy costs stemming from the war in Iran will boost overall inflation. He added that he anticipated core inflation would rise by just one or two tenths of a percentage point.
Swaps markets are discounting the odds at 3% for a +25 bp rate hike at the April 28-29 FOMC meeting.
The dollar continues to be undercut by a 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 is up by +0.26%. The euro is moving higher today amid a weaker dollar. Also, today’s upward revision to the Eurozone Mar S&P composite PMI is supportive of the euro. In addition, hawkish comments today from ECB Governing Council member Pierre Wunsch boosted the euro, as he said the ECB might have to raise interest rates several times if the Iran war drags on.
Gains in the euro are limited today after the Eurozone Apr Sentix investor confidence index fell more than expected to a 2.5-year low. Also, today’s rally in crude oil prices to a 4-week high is negative for the euro and the Eurozone, as Europe imports most of its energy needs.
The Eurozone Apr Sentix investor confidence index fell -16.1 to a 2.5-year low of -19.2, weaker than expectations of -8.0.
The Eurozone Mar S&P composite PMI was revised upward by +0.2 to 50.7 from the previously reported 50.5.
Swaps are discounting a 58% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) today is up by +0.11%. The yen is moving lower today as crude oil prices climb to a 4-week high, which is negative for the yen and Japan’s economy, as Japan imports nearly all of its energy needs. Also, today’s report showing a larger-than-expected decline in Japanese household spending is bearish for the yen. Losses in the yen are limited after the Japan Feb leading index CI rose +0.3 to a 3.5-year high. Also, lower T-note yields today are supportive of the yen.
The markets are discounting a +50% chance of a 25 bp BOJ rate hike at the next meeting on April 28.
June COMEX gold (GCM26) today is down -39.00 (-0.83%), and May COMEX silver (SIK26) is down -2.622 (-3.60%).
Gold and silver prices are moving lower today amid concerns that higher global energy prices will force the world’s central banks to tighten monetary policy, a bearish factor for precious metals. WTI crude oil is up more than +3% today at a 4-week high.
Precious metals have safe-haven support on concerns that the Iran war could escalate if there is no deal to reopen the Strait of Hormuz by Tuesday night. Iran’s Middle Eastern neighbors are growing frustrated with Iran, which has responded to US and Israeli attacks by hitting targets in several nearby nations. In addition, strong buying of gold by China’s central bank (PBOC) is bullish for gold prices as the PBOC purchased 160,000 troy ounces of gold in March, the most in 11 months.
Precious metals continue to see strong safe-haven demand amid the ongoing war in Iran. Also, uncertainty over US tariffs, US political turmoil, large US deficits, and government policy uncertainty are boosting demand for precious metals as a store of value.
Recent fund liquidation of precious metals is bearish for prices, as long holdings in gold ETFs fell to a 3.75-month low last Tuesday after climbing to a 3.5-year high on February 27. Also, long holdings in silver ETFs fell to a 6.5-month low on March 27 after rising to a 3.5-year high on December 23.
Strong central bank demand for gold is supportive of gold prices, following the recent news that bullion held in China’s PBOC reserves rose by +160,000 ounces to 74.38 million troy ounces in March, the seventeenth consecutive month the PBOC has boosted its gold reserves.
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