Market Update: Dollar Steady Amid Mixed Global Conditions
The dollar index (DXY00) remains largely unchanged today. A decline of -4 basis points in the 10-year Treasury note yield is putting pressure on the dollar. Additionally, the euro is receiving a boost from the results of Sunday’s elections in Germany.
Upcoming US Economic Indicators
Attention now shifts to a week filled with key economic reports from the US. The consumer confidence index from the Conference Board is projected to drop by -1.4 points to 102.7 on Tuesday. On Thursday, the Q4 GDP report is expected to show a growth of +2.3% on a quarterly annualized basis, with personal consumption anticipated to rise by +4.1%. Finally, Friday will bring the January PCE price index, which the Federal Reserve closely monitors; it’s expected to ease to +2.5% year-over-year from December’s +2.6%. The core index is also projected to decline to +2.6% year-over-year from +2.8%.
New Trade Measures Impacting China Relations
The Trump administration has introduced new measures targeting China, proposing fees on commercial ships built in the country. This move has led to a decrease in Chinese shipping stocks. Additionally, President Trump has directed the US Committee on Foreign Investment to restrict Chinese investments in vital US sectors including technology, agriculture, and resources.
Rate Cut Speculations
The markets are currently estimating a 2% likelihood of a -25 basis point rate cut at the forthcoming FOMC meeting on March 18-19.
Eurozone Currency Movements
The EUR/USD (^EURUSD) has inched up by +0.06%. Support for the euro arises from the conservative Christian Democrat party, led by Friedrich Merz, gaining a plurality in the German elections and outperforming the far-right Alternative for Germany (AfD). However, forming a ruling coalition may prove challenging for the centrist parties.
Despite these developments, the euro faced pressure as the February IFO Business Climate index stayed flat at 85.2, falling short of expectations which had hoped for a rise to 85.8.
The final January Eurozone CPI has been confirmed at a -0.3% month-over-month change and +2.5% year-over-year, matching market expectations, while the core CPI remained steady at +2.7% year-over-year.
ECB Rate Cut Forecasts
Swaps are indicating a 98% probability for a -25 basis point rate cut by the European Central Bank at its policy meeting scheduled for March 6.
Japanese Yen Stability and Economic Conditions
The USD/JPY (^USDJPY) has seen a slight increase of +0.03%. The yen is being supported by stable yields on the 10-year Japanese Government Bonds, which remained unchanged, while US T-note yields fell by -4 basis points. The 10-year JGB yield reached a 15-year peak of 1.466% last Friday, enhancing the yen’s attractiveness due to interest rate differentials. However, Bank of Japan Governor Ueda noted that the BOJ would increase bond purchases if long-term yields climbed rapidly. Furthermore, Japan’s January national CPI rose to a two-year high of +4.0% year-over-year last Friday.
Recent Trends in Precious Metals
In the commodities market, April gold (GCJ25) is slightly up by +2.0 (+0.07%), while March silver (SIH25) is down -0.527 (-1.60%). The rise in gold prices can be attributed to lower US T-note yields and geopolitical tensions stemming from new trade regulations against China. In contrast, silver is facing downward pressure due to concerns over the US economy, highlighted by last Friday’s weak economic data that saw consumer sentiment plunge to a 15-month low and a -4.9% drop in January existing home sales.
On the date of publication, Rich Asplund did not hold (neither directly nor indirectly) positions in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For further details, please consult the Barchart Disclosure Policy here.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
