The dollar, represented by the dollar index (DXY00), witnessed a decline of -0.05% this morning. A tale as old as time unfolded today – the dollar, emboldened by last Friday’s robust US March payroll report, initially surged, only to falter in the face of a formidable opponent – the euro. The surge was powered by rising T-note yields, with the 10-year T-note yield hitting a 4-1/2 month pinnacle.
Looking ahead, the markets are discounting the likelihood of a -25 bp rate cut, estimating a 6% probability for the upcoming FOMC meeting on April 30-May 1, and 52% for the subsequent meeting on June 11-12.
Strength of Euro Sends Ripples Across Markets
The EUR/USD pair (^EURUSD) displayed resilience today, with the euro making a comeback from early losses to emerge victorious. The resurgence was fueled by upbeat Eurozone confidence and German industrial production reports.
The Eurozone Apr Sentix investor confidence index exceeded expectations, soaring by +4.6 to -5.9, marking a 2-year high. German industrial production in Feb also trumped forecasts, surging by +2.1% m/m, the most substantial spike in 13 months.
While German trade data bore mixed results, with exports dipping by -2.0% m/m, and imports surprisingly climbing by +3.2% m/m, indicating a complex economic landscape. Swap rates are placing their bets on a -25 bp rate cut by the ECB, with a 6% chance for the April 11 meeting, and a substantial 93% for the June 6 session.
USD/JPY Eyes the Sky as T-Note Yields Soar
T-note yields scaling to a 4-1/2 month peak played a pivotal role in boosting USD/JPY (^USDJPY) by +0.13% today, dealing a blow to the yen’s standing. The yen faced additional pressure following a decline in Mar eco watchers outlook survey. However, a glimmer of hope shone through with the report of Feb labor cash earnings hitting an 8-month high, indicating a hawkish turn in BOJ policy.
On the other hand, Japan witnessed a decline in Mar eco watchers outlook survey, falling unexpectedly by -1.8 to 51.2, missing projections. Despite this setback, Feb labor cash earnings managed to climb by +1.8% y/y, adhering to expectations and marking the most significant increase in 8 months. Swap rates suggest a possible +10 bp rate increase by the BOJ, with a 0% chance for the April 26 meeting and a modest 9% for the June 14 gathering.
Precious Metals Take a Roller Coaster Ride Amidst Global Turmoil
June gold (GCM4) experienced a dip of -4.4 (-0.19%) this morning, whereas May silver (SIK24) saw a decline of -0.043 (-0.16%). Precious metals, like fickle lovers, surrendered early gains as they traversed a landscape marred by elevated global government bond yields and a buoyant stock market, dampening safe-haven sentiments.
Despit initial surges that saw June gold and April gold recording highs, and May silver posting a contract high and April silver scaling a 2-3/4 year zenith, the tide turned downwards. A weakened dollar played a minor role in propelling metals. Besides, the robust demand for gold from central banks saw a steady increase, with the PBOC holding 72.74 million troy ounces in gold, marking seventeen consecutive months of growth.
Not to be outdone, precious metals found solace in the chaos of heightened geopolitical tension between Iran and Israel. Iran’s retaliatory threats following Israeli airstrikes on Iranian military officials in Syria stoked safe-haven demand for precious metals. Additionally, fund buying in the silver sector soared, with long silver holdings in ETFs climbing to a 7-1/2 month apex last Friday.
More Precious Metal News from Barchart
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
