The dollar index (DXY00) Tuesday fell by -0.94%. The dollar tumbled Tuesday as trade worries eased after the US delayed a 25% tariff on goods from Canada late Monday. Also, China’s restrained response to US tariffs eased concerns of a broader trade war. The stabilization of stock prices Tuesday also reduced liquidity demand for the dollar.
Losses in the dollar accelerated on Tuesday’s weaker-than-expected US JOLTS job openings and factory orders reports. However, Monday evening’s comments from Chicago Fed President Goolsbee were hawkish for Fed policy and dollar-supportive when he said the Fed should proceed cautiously before cutting interest rates. Also, San Francisco Fed President Daly said the US economy is in a good position, and the Fed can take its time before deciding on interest rates.
US Dec JOLTS job openings fell -556,000 to 7.6 million, showing a weaker labor market than expectations of 8.0 million.
US Dec factory orders fell -0.9% m/m, weaker than expectations of -0.8% m/m and the biggest decline in 6 months.
San Francisco Fed President Daly said the US economy is in a good position, and "the Fed can take its time to look at what's coming in, both on the economy and any policy changes" before deciding on interest rates.
Monday evening, Chicago Fed President Goolsbee said, “The Fed has got to be a little more careful and more prudent of how fast interest rates can come down because there are risks that inflation is about to start kicking back up again.”
The markets are discounting the chances at 15% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) Tuesday rose by +0.40%. The euro recovered from early losses Tuesday and moved higher after the dollar tumbled on weaker-than-expected US economic news. The euro was also supported Tuesday by higher European government bond yields, which strengthened the euro’s interest rate differentials. Trade concerns limit gains in the euro after President Trump threatened to impose tariffs on the Eurozone, which would undercut economic growth and possibly push the Eurozone economy into recession.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.
USD/JPY (^USDJPY) Tuesday fell by -0.309%. The yen on Tuesday recovered from early losses and turned higher after T-note yields and the dollar declined on weaker-than-expected US economic news. The yen also has support from higher Japanese government bond yields after the 10-year JGB bond yield Tuesday rose to a 13-year high of 1.281%, strengthening the yen’s interest rate differentials.
The yen on Tuesday initially moved lower as an easing of trade war fears curbed safe-haven demand for the yen after the US said it would delay 25% tariffs on Canada and Mexico for a month.
April gold (GCJ25) Tuesday closed up +18.70 (+0.65%), and March silver (SIH25) closed up +0.496 (+1.52%). Precious metals on Tuesday posted moderate gains, with April gold climbing to a contract high and nearest futures (G25) climbing to an all-time high of $2,853.30 an ounce. Silver also posted a 7-week high. Tuesday’s weaker dollar was supportive of metals prices. Also, the action by the US to impose a 10% tariff on Chinese goods and China’s swift retaliation to impose its tariffs on US goods threatens to ignite a trade war that boosted safe-haven demand for precious metals. Gains in precious metals accelerated on Tuesday’s weaker-than-expected US JOLTS job openings and factory orders reports, dovish factors for Fed policy.
Gains in precious metals were limited as safe-haven demand for precious metals subsided after the US agreed to delay 25% tariffs on Canada and Mexico for a month. Also, the stabilization of stocks Tuesday reduced safe-haven demand for precious metals. Industrial metals prices were undercut after the US imposed a 10% tariff on Chinese goods and China retaliated with its tariffs on US goods, which could ignite a trade war that derails economic growth and industrial metals demand.
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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