The dollar index (DXY00) today is up by +0.34%. Today's stock slump has boosted liquidity demand for the dollar. Also, higher T-note yields today have strengthened the dollar's interest rate differentials. Today's US economic news was mostly supportive for the dollar as weekly jobless claims rose less than expected and the Jan trade deficit narrowed more than expected, while Jan housing starts unexpectedly rose to an 11-month high.
US weekly initial unemployment claims fell -1,000 to 213,000, showing a stronger labor market than expectations of an increase to 215,000.
US Jan housing starts unexpectedly rose +7.2% m/m to an 11-month high of 1.487 million, stronger than expectations of a decline to 1.341 million. Jan building permits, a proxy for future construction, fell -5.4% m/m to a 5-month low of 1.376 million, weaker than expectations of 1.410 million.
The US Jan trade deficit shrank to -$54.5 billion, narrower than expectations of -$66.0 billion.
Swaps markets are discounting the odds at 0% for a -25 bp rate cut at the next FOMC policy meeting on March 17-18.
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) today is down -0.37% on dollar strength. Also, the euro was undercut by comments today from the European Union's economy chief, Valdis Dombrovskis, who said the inflation rate could surpass 3% this year and GDP in the Eurozone could be as much as -0.4 points lower if the war in the Middle East causes crude oil prices to remain around $100 per barrel and gas prices stay elevated for an extended period.
Swaps are discounting a 4% chance of a +25 bp rate hike by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) today is up by +0.08%. The yen tumbled to an 8-week low against the dollar today due to surging crude prices, which are negative for Japan's economy. Today's higher T-note yields are also bearish for the yen. Losses in the yen are limited following comments from BOJ Governor Ueda, who said forex is a key factor affecting prices and tends to affect inflation more than before.
The Japan Q1 BSI large all-industry business conditions index fell to 4.4 from 4.9 in Q4.
The markets are discounting a +3% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) today is down -10.1 (-0.20%), and May COMEX silver (SIK26) is up +0.960 (+1.12%).
Gold and silver prices are mixed today. Higher global bond yields and a stronger dollar today are weighing on gold prices. However, weakness in stocks has sparked some safe-haven demand for precious metals. Also, precious metals have underlying support from safe-haven demand amid the war in Iran. Silver has support today after US Jan housing starts unexpectedly rose to an 11-month high, a bullish factor for industrial metals demand.
Strong central bank demand for gold is also supportive of gold prices, following the recent news that bullion held in China's PBOC reserves rose by +40,000 ounces to 74.19 million troy ounces in January, the fifteenth consecutive month the PBOC has boosted its gold reserves.
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high on February 27. Also, long holdings in silver ETFs rose to a 3.5-year high on December 23, though liquidation has since knocked them down to a 3.5-month low on February 23.
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.
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