Dollar Weighed Down by Euro Strength

The dollar index (DXY00) this morning is down by -0.07%.  The dollar gave up early gains and turned lower as the euro strengthened on positive Eurozone economic news.  Today, the dollar initially moved higher as weakness in stocks boosted some liquidity demand for the dollar.  Also, higher T-note yields today have strengthened the dollar’s interest rate differentials. 

The markets are discounting the chances for a -25 bp rate cut at 2% for the March 19-20 FOMC meeting and 23% for the following meeting on April 30-May 1.

EUR/USD (^EURUSD) this morning is up by +0.24%.  The euro today is moderately higher and garnered support from a weaker dollar.  Also, today’s economic news that showed the Eurozone Mar Sentix investor confidence index rose more than expected to an 11-month high supports the euro.

The Eurozone Mar Sentix investor confidence index rose +2.4 to an 11-month high of -10.5, stronger than expectations of -10.6.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 3% for its next meeting on March 7 and 18% for the following meeting on April 113

USD/JPY (^USDJPY) this morning is up by +0.17%.  The yen is under pressure today from higher T-note yields. Also, today’s rally in the Nikkei Stock Index to a new all-time high has reduced the safe-haven demand for the dollar. Losses in the yen are limited after today’s news showed Japan’s Q4 capital spending rose more than expected, a sign of confidence in Japan’s economy and a bullish factor for the yen.

Japan’s Q4 capital spending rose +16.4% y/y, stronger than expectations of +2.8% y/y and the biggest increase in 16 years.  Also, Q4 capital spending ex-software rose +11.7% y./y, stronger than expectations of +1.5% y/y and the most in 5-1/2 years.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 36% for its next meeting on March 19 and 77% for the following meeting on April 26.

April gold (GCJ4) this morning is up +11.0 (+0.52%), and May silver (SIK24) is up +0.316 (+1.35%).  Precious metals this morning are moderately higher, with gold climbing to a 3-month high and silver posting a 2-month high.  A weaker dollar today is bullish for metals.  Also, stock weakness today has spurred some safe-haven buying of precious metals.  Silver also garnered support from today’s global economic news that showed Eurozone Mar Sentix investor confidence rose more than expected to an 11-month high, and Japan’s Q4 capital spending climbed by the most in 16 years, favorable factors for industrial metals demand.

On the negative side, higher global bond yields are bearish for precious metals.  Gold is also under pressure as expectations for Fed rate cuts have been pushed back until Q2 of this year compared to previous expectations for Fed rate cuts as early as this month. 

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.