The dollar index (DXY00) on Monday ended the day little changed. The dollar was undercut by Monday’s -4 bp decline in the 10-year T-note yield. Also, the euro saw support from Sunday’s German election results.
The forex markets are looking ahead to a busy US economic schedule this week. Tuesday’s Feb Conference Board US consumer confidence index is expected to show a -1.4 point decline to 102.7. Thursday’s US Q4 GDP report is expected to show an increase of +2.3% (q/q annualized), with a +4.1% increase in personal consumption. Friday’s Jan PCE price index report, the Fed’s preferred inflation measure, is expected to ease slightly to +2.5% y/y from December’s +2.6%, and the core index is expected to ease to +2.6% y/y from December’s +2.8%.
The Trump administration launched fresh measures against China. The administration proposed fees on the use of commercial ships made in China, which caused Chinese shipping stocks to fall on Monday. President Trump also issued a memorandum to the US Committee on Foreign Investment in the US instructing the Committee to limit China’s ability to invest in key US sectors such as technology, food, farmland, minerals, natural resources, ports, and shipping terminals.
The markets are discounting the chances at 3% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) on Monday rose by +0.09%. The euro saw support after the conservative Christian Democrat party, led by Friedrich Merz, won a plurality in Sunday’s German election, beating the far-right Alternative for Germany (AfD) party. However, the centrist parties are expected to have difficulty building a ruling coalition.
The euro was undercut after the Feb German IFO Business Climate index was unchanged at 85.2, weaker than expectations for an increase to 85.8.
The final-Jan Eurozone CPI was left unrevised at -0.3% m/m and +2.5% y/y, and the core CPI was left unrevised at +2.7% y/y, in line with market expectations.
Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at the March 6 policy meeting.
USD/JPY (^USDJPY) edged to a new 2-3/4 year low, but then recovered on some short-covering and ended the day up +0.32%. The yen had continued support from improved Japanese interest rate differentials after the 10-year JGB bond yield last Friday rose to a 15-year high of 1.466%. However, BOJ Governor Ueda warned last Friday that the BOJ would boost its purchases of government bonds if long-term bond yields rose too quickly. Japan’s Jan national CPI last Friday rose to a 2-year high of +4.0% y/y.
April gold (GCJ25) on Monday closed up +10.00 (+0.34%), and March silver (SIH25) closed down -0.409 (-1.24%). Gold prices saw support from lower US T-note yields. Gold also saw geopolitical support as the Trump administration launched new trade and investment measures against China, and as European politics shift. Silver prices were undercut by continued concern about the US economy after last Friday’s weak economic reports, when consumer sentiment fell to a 15-month low and Jan existing home sales fell -4.9%.
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.More news from Barchart
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