The dollar index (DXY00) Tuesday rose by +0.19%. The dollar posted moderate gains on Tuesday amid tariff relief expectations after the Wall Street Journal reported that President Trump will ease auto tariffs and lift levies on foreign parts for cars and trucks made in the US. The dollar fell back from its best level after the US trade deficit unexpectedly widened to a record high, a negative factor for Q1 GDP, and after the Conference Board US Apr consumer confidence index fell more than expected to a 5-year low.
The US Mar trade deficit unexpectedly widened to a record high of -$162.0 billion, wider than expectations of -$145.0 billion and a negative factor for Q1 GDP.
The US Feb S&P CoreLogic composite 20 home price index rose +4.5% y/y, weaker than expectations of +4.7% y/y.
US Mar JOLTS job openings fell -288,000 to a 6-month low of 7.192 million, showing a substantially weaker labor market than expectations of 7.500 million.
The Conference Board US Apr consumer confidence index fell -7.3 to a 5-year low of 86.0, weaker than expectations of 88.0.
The markets are discounting the chances at 10% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week.
EUR/USD (^EURUSD) Tuesday fell by -0.34%. The euro on Tuesday fell moderately due to pressure from a stronger dollar. Also, Tuesday's news that Eurozone Apr economic confidence fell more than expected to a 4-month low was bearish for the euro. Losses in the euro were limited after the ECB's March CPI inflation expectations indicator unexpectedly increased, which is a hawkish factor for ECB policy.
The Eurozone Apr economic confidence index fell -1.4 to a 4-month low of 93.6, weaker than expectations of 94.5.
The ECB Mar 1-year CPI inflation expectations indicator unexpectedly rose to an 11-month high of +2.9% from +2.6% in Feb, stronger than expectations of a decline to +2.5%. The ECB Mar 3-year CPI expectations indicator unexpectedly rose to a 1-year high of +2.5% from +2.4% in Feb, stronger than expectations of a decline to +2.3%.
Comments from ECB Governing Council member Stournaras were slightly hawkish and supported the euro when he said the ECB should proceed carefully with additional interest rate cuts due to the uncertain global environment.
Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at the June 5 policy meeting.
USD/JPY (^USDJPY) Tuesday rose by +0.20%. The yen posted moderate losses on Tuesday as an easing of trade tensions has reduced the yen's safe-haven appeal after the Wall Street Journal reported that President Trump will lift tariffs on foreign parts for cars and trucks made in the US. Losses in the yen were limited as T-note yields declined, a supportive factor for the yen. Tuesday's trading activity in the yen was muted, with Japanese markets closed for the Showa Day holiday.
June gold (GCM25) Tuesday closed down -14.10 (-0.42%), and May silver (SIK25) closed up +0.270 (+0.82%). Precious metals prices on Tuesday settled mixed. Gold was under pressure Tuesday, and silver moved higher on signs of reduced tariffs. The Wall Street Journal reported that President Trump would lift tariffs on foreign parts for cars and trucks made in the US. The lifting of the foreign parts tariffs curbs safe-haven demand for gold but is a positive factor for industrial metals demand and silver prices. Tuesday's stronger dollar is a bearish factor for precious metals prices. Hawkish comments from ECB Governing Council member Stournaras weighed on gold prices when he said the ECB should proceed carefully with additional interest rate cuts.
Concern the US-China trade war will persist and undercut global economic growth is boosting safe-haven demand for gold and undercutting silver after President Trump said the US would not lower tariffs on China unless "they give us something substantial." Geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as the Israel-Hamas and the US-Houthi conflicts continue.
