The dollar index (DXY00) today is up by +0.62% at a 2-week high. The dollar is moderately higher today on a possible easing of US-China trade tensions after state-run China Central Television said the US has been proactively reaching out to China through various channels, seeking to negotiate on tariff issues. The dollar extended its gains after the US Apr ISM manufacturing index fell less than expected.
Limiting gains in the dollar was today’s US economic news that showed weekly jobless claims rose to a 2-month high, and Mar construction spending unexpectedly declined, dovish factors for Fed policy. Also, today’s stock rally has reduced liquidity demand for the dollar.
US weekly initial unemployment claims rose +18,000 to a 2-month high of 241,000, showing a weaker labor market than expectations of 223,000. Also, weekly continuing claims rose +83,000 to a 3-1/2 year high of 1.916 million, showing a weaker labor market than expectations of 1.865 million.
The US Apr ISM manufacturing index fell -0.3 to a 5-month low of 48.7, although that was stronger than expectations of a larger decline to 47.9. The Apr ISM prices paid sub-index rose +0.4 to a 2-3/4 year high of 69.8, although that was below expectations of 73.0.
US Mar construction spending unexpectedly fell -0.5% m/m, weaker than expectations of a +0.2% m/m increase and the largest decline in 6 months.
The markets are discounting the chances at 8% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week.
EUR/USD (^EURUSD) today is down by -0.33% at a 2-week low. The dollar’s strength today is weighing on the euro. However, thin trading conditions may exaggerate moves in EUR/USD with most European markets closed today for the Labour Day holiday.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the June 5 policy meeting.
USD/JPY (^USDJPY) today is up by +1.31%. The yen tumbled to a 3-week low against the dollar today after the BOJ unanimously kept interest rates unchanged. The yen also came under pressure after the Japan Apr consumer confidence index fell more than expected to a 2-year low. Losses in the yen accelerated after the BOJ cut its Japan 2025 GDP forecast and its 2025 core CPI forecast.
The Japan Apr consumer confidence index fell -2.9 to a 2-year low of 31.2, weaker than expectations of 33.8.
The Japan Apr Jibun Bank manufacturing PMI was revised upward by +0.2 to 48.7 from the previously reported 48.5.
The BOJ, as expected, voted 9-0 to keep the overnight call rate unchanged at 0.50% and said the risks are skewed to the downside for the economy and prices in fiscal years 2025 and 2026.
The BOJ cut its 2025 GDP forecast to +0.5% from +1.1% in Jan and cut its 2025 core CPI forecast to +2.2% from +2.4% in Jan.
June gold (GCM25) today is down -89.40 (-2.68%), and July silver (SIN25) is down -0.228 (-0.69%). Precious metals prices today are sharply lower, with gold and silver falling to 2-1/2 week lows. Today’s rally in the dollar index to a 2-week high is bearish for metals. Also, a possible easing of US-China trade tensions has sparked long liquidation in precious metals after China Central Television said the US has been proactively reaching out to China through various channels, seeking to negotiate on tariff issues. In addition, today’s stock rally has curbed safe-haven demand for precious metals. On the bullish side, precious metals prices have continued support from geopolitical risks in the Middle East as the Israel-Hamas and the US-Houthi conflicts continue.
Silver prices are under pressure today after the BOJ cut its Japan 2025 GDP forecast, a negative factor for industrial metals demand. Other bearish news for industrial metals demand included today’s news that the US ISM manufacturing index fell to a 5-month low and Mar construction spending unexpectedly fell by the most in 6 months.
