The U.S. dollar index (DXY00) fell to a 1.5-week low on Monday, finishing down 0.65%. This decline followed President Trump’s postponement of planned strikes on Iranian infrastructure, as talks commenced to end the war, reducing liquidity demand for the dollar. The February Chicago Fed National Activity Index unexpectedly dropped to -0.11 from a prior -0.31, against expectations of 0.16. Additionally, January construction spending fell by 0.3% month-over-month, contrary to forecasts for a 0.1% increase.
In foreign exchange, the euro (EUR/USD) rose by 0.44% as crude oil prices fell over 10%, boosting the Eurozone economy. The March consumer confidence index in the Eurozone fell to -16.3, the lowest in nearly 2.5 years, while swaps indicate a 68% chance for a 25 basis point rate hike by the ECB at its April 30 meeting. Meanwhile, the Japanese yen (USD/JPY) fell 0.67%, supported by crude oil price drops and wage increases above 5% secured by labor unions, indicating potential rate hikes from the Bank of Japan.
Gold prices closed at a 4-month low with a drop of $167.60 (-3.66%) on Monday, while silver fell to a 3.25-month low. These declines were driven by reduced safe-haven demand amid stock rallies and hawkish comments from ECB officials regarding inflation. However, strong central bank demand, particularly from China’s PBOC, which increased its gold reserves by 40,000 ounces in January, offered some support to gold prices.
