The dollar index (DXY00) has risen +0.09% today. The dollar is rising today thanks to better-than-expected US retail sales and pending March home sales reports. The dollar is also supported by signs that Federal Reserve Chairman nominee Kevin Warsh will support an independent Federal Reserve and prioritize low inflation. Politico reported that Fed Chairman nominee Warsh’s prepared statement to the Senate Banking Committee later today will say that he is committed to ensuring that the conduct of monetary policy remains “strictly independent” and that he is committed to keeping inflation under control, saying that price stability is a mandate for the Federal Reserve “without excuses or equivocation.”
The dollar’s gains are limited today as the strength in stocks reduces demand for the currency’s liquidity. In addition, hopes that negotiations between the United States and Iran will lead to an end to hostilities have curbed demand for safe-haven dollars after Iran said it would send a team to Pakistan to negotiate with the United States.
March US retail sales rose +1.7% m/m, stronger than expectations of +1.4% m/m and the largest increase in a year. Additionally, March retail sales excluding automobiles rose +1.9% MoM, stronger than expectations of +1.4% MoM and the largest increase in 3 years.
US March Pending Home Sales rose +1.5%, stronger than expectations of +0.5% MoM.
Swap markets are pricing in 1% odds of a +25bp rate hike at the April 28-29 FOMC meeting.
The dollar remains weakened by a poor outlook for interest rate differentials: the FOMC is expected to cut interest rates by at least -25 bps in 2026, while the BOJ and ECB are expected to raise rates by at least +25 bps in 2026.
EUR/USD (^EURUSD) is down -0.17% today. Today’s April German ZEW survey, which showed German investor optimism fell more than expected to a three-and-a-half-year low, is weighing on the euro. Furthermore, the strength of the dollar today is bearish for the euro. Losses in the euro are limited by a -1% drop in crude oil prices, which is positive for the eurozone economy and the euro as Europe imports most of its energy.
German ZEW survey economic growth expectations for April fell -16.7 to a 3.25-year low of -17.2, weaker than expectations of -5.8.
The swaps price in a 10% probability of a +25bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) is up +0.19% today. The yen is under pressure today from a stronger dollar. The yen is also falling due to today’s Nikkei report that said the BOJ is likely to keep interest rates unchanged at 0.75% at its monetary policy meeting next week, given the uncertainties arising from the war in Iran. Today’s higher Treasury yields are also bearish for the yen.
The Nikkei reported that the BOJ is likely to keep interest rates unchanged at 0.75% at its policy meeting next week, given uncertainties arising from the war in Iran, and that a decision on whether to raise rates will be delayed until the June meeting.
Markets are pricing in a +5% chance of a 25bp rate hike by the BOJ at the next meeting on April 28.
June COMEX Gold (GCM26) is down -31.40 (-0.65%), and May COMEX Silver (SIK26) is down -1.208 (-1.51%) today.
Gold and silver prices are declining today amid a stronger dollar. Additionally, hopes that negotiations between the United States and Iran will lead to an end to the war are dampening demand for safe haven precious metals after Iran said it would send a team to Pakistan to negotiate with the United States. Today’s better-than-expected US retail sales and March pending home sales reports are bullish for Fed policy and are undermining precious metals prices.
Concerns that the US-Iran war will persist are supporting safe-haven demand for precious metals after Iran said on Saturday that the Strait of Hormuz was closed to shipping following the US’s refusal to lift a naval blockade of Iranian vessels. Additionally, President Trump said it is “highly unlikely” that he will extend the ceasefire with Iran past Wednesday’s deadline. Additionally, today’s Nikkei report said the BOJ is likely to keep interest rates unchanged at next week’s monetary policy meeting, supporting precious metals.
Precious metals remain supported by uncertainty over US tariffs, US political turmoil, large US deficits and uncertainty over government policies, which are driving demand for precious metals as a store of value.
The recent liquidation of precious metals funds is bearish for prices, as long holdings in gold ETFs fell to a 4-month low on March 31 after reaching a 3.5-year high on February 27. Additionally, long holdings in silver ETFs fell to a 7-month low on March 27 after reaching a 3.5-year high on December 23.
Strong demand for gold from the central bank supports gold prices, following recent news that bullion held in China’s PBOC reserves increased by +160,000 ounces to 74.38 million troy ounces in March, the 17th consecutive month that the PBOC has increased its gold reserves.
On the date of publication, Rich Asplund had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
