On Wednesday, the dollar index (DXY00) fell by 0.71%, reaching a 4-week low, due to a ceasefire agreement between the US and Iran, which diminished safe-haven demand for the dollar. This decline coincided with equity markets surging and Treasury note yields dropping sharply, further weakening the dollar’s appeal. Swaps markets now reflect only a 1% probability of a 25 basis point rate hike at the Federal Open Market Committee (FOMC) meeting on April 28-29.
In contrast, the euro strengthened, rising by 0.47% to a 5-week high, influenced by the dollar’s slump and a 15% drop in crude oil prices. However, Eurozone economic indicators showed mixed results, with February retail sales falling by 0.2% month-over-month and producer prices declining 3.0% year-over-year, marking significant declines. Meanwhile, the Japanese yen rose 0.57% against the dollar following lower Treasury yields, although a recent Eco Watchers Outlook Survey showed the weakest sentiment in 5.25 years.
Comex gold closed up 1.97% at a 2.5-week high, while silver increased by 4.72% to a 3-week high, driven by the weakened dollar and lower global bond yields. Notably, China’s PBOC increased its gold reserves by 160,000 ounces in March, reflecting robust central bank demand that is supportive of gold prices.
