The dollar index (DXY00) on Wednesday fell by -0.07%.  The dollar fell slightly on Wednesday after the S&P 500 rallied to a new all-time high, reducing liquidity demand for the dollar. Also, geopolitical tensions eased and weighed on the dollar after the AP reported that the US and Iran had reached an “in principle agreement” to extend the ceasefire to allow more time for diplomacy. The US and Iran are considering extending their ceasefire, which ends on Tuesday, by another two weeks to allow more time to negotiate a peace agreement. 

Losses in the dollar were limited on Wednesday from hawkish comments from Cleveland Fed President Beth Hammack, who said her baseline is that the Fed is on hold for a “good while.” Wednesday’s US economic news was mixed for the dollar after the Apr Empire manufacturing survey general business conditions rose more than expected to a 5-month high, but the Apr NAHB housing market index fell more than expected to a 7-month low. 

The Fed Beige Book was somewhat hawkish and supportive of the dollar, as it stated that economic activity continued to increase at a slight-to-modest pace, with moderate price growth overall, but energy and fuel costs rose “sharply” across all 12 Fed districts in the six weeks to April 6.

The US Apr Empire manufacturing survey of general business conditions rose +11.2 to a 5-month high of 11.0, stronger than expectations of 0.0.

The US Mar import price index ex-petroleum rose +0.1% m/m, weaker than expectations of +0.3% m/m.

The US Apr NAHB housing market index fell -4 to a 7-month low of 34, weaker than expectations of 37.

Swaps markets are discounting the odds at 1% 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) on Wednesday rose by +0.04%.  The dollar’s weakness on Wednesday was supportive of the euro.  Also, today’s news showing Eurozone Feb industrial production rose more than expected was bullish for the euro.  In addition, crude oil prices turned lower on Wednesday, a positive factor for the Eurozone economy and the euro, as Europe imports most of its energy.

Eurozone Feb industrial production rose +0.4% m/m, stronger than expectations of +0.3% m/m.

Swaps are discounting a 24% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.

USD/JPY (^USDJPY) on Wednesday rose by +0.13%.  The yen moved lower on Wednesday on reduced safe-haven demand after the Nikkei Stock Index rallied to a 1.5-month high.  Also, higher T-note yields on Wednesday were bearish for the yen.

Losses in the yen were limited on Wednesday after Japan Feb core machine orders posted their largest increase in 15 years.  The yen also has carryover support from Tuesday, when Bloomberg reported that BOJ officials are likely to sharply raise their inflation forecast at this month’s policy meeting, a hawkish factor for BOJ policy.

Japan Feb core machine orders rose +24.7% y/y, stronger than expectations of +8.1% y/y and the biggest increase in more than 15 years.

The markets are discounting a +27% chance of a 25 bp BOJ rate hike at the next meeting on April 28.

June COMEX gold (GCM26) on Wednesday closed down -26.50 (-0.55%), and May COMEX silver (SIK26) closed up +0.095 (+0.12%).

Gold and silver prices settled mixed on Wednesday, with silver climbing to a 4-week high.  Gold prices fell from a 4-week high on Wednesday and then moved lower after the S&P 500 rallied to a new all-time high, which curbed safe-haven demand for precious metals.  Also, hawkish comments on Wednesday from Cleveland Fed President Beth Hammack pushed bond yields higher and weighed on precious metals prices when she said the Fed is on hold for a “good while.”

Precious metals found support on Wednesday as optimism over peace talks between the US and Iran knocked crude prices lower, which eases inflation concerns and could prompt the world’s central banks to pursue easier monetary policy, a bullish factor for precious metals.  The AP reported on Wednesday that the US and Iran had reached an “in principle agreement” to extend the ceasefire to allow more time for diplomacy. 

Silver prices received support on Wednesday after the Silver Institute said the global silver market will remain in deficit for a sixth consecutive year, with the 2026 global deficit widening by 15% to -46.3 million troy ounces. 

Precious metals still have safe-haven support over concerns about the escalation of the US-Iran war after President Trump ordered a full naval blockade of the Strait of Hormuz.  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 4-month low on March 31 after climbing to a 3.5-year high on February 27.  Also, long holdings in silver ETFs fell to a 7-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.