Dollar Climbs with T-Note Yields

Rich Asplund - Barchart - Mon Apr 22, 9:28AM CDT

The dollar index (DXY00) this morning is up by +0.13%. Higher T-note yields today are giving the dollar a boost. Also, today’s US Mar Chicago Fed national activity index was stronger than expected and boosted the dollar. Gains in the dollar are limited as strength in stocks today curbs liquidity demand for the dollar.

The US Mar Chicago Fed national activity index rose +0.06 to a 4-month high of 0.15, stronger than expectations of 0.07.

The markets are discounting the chances for a -25 bp rate cut at 3% for the next FOMC meeting on April 30-May 1 and 19% for the following meeting on June 11-12.

EUR/USD (^EURUSD) today is down by -0.17%. Today, the euro is under pressure from a stronger dollar. Also, policy divergence between the ECB and the Fed is undercutting the euro, with the ECB expected to begin cutting interest rates at its June meeting while the Fed is expected to delay cutting rates. EUR/USD extended its losses today after ECB Governing Council member Centeno said the ECB could cut interest rates by more than 100 basis points this year.

The Eurozone Apr consumer confidence index rose +0.2 to a 2-year high of -14.7, slightly weaker than expectations of -14.5.

Swaps are discounting the chances for a -25 bp rate cut by the ECB at 86% for its next meeting on June 6.

USD/JPY (^USDJPY) today is up by +0.08%. The yen today is slightly lower and is just above last Tuesday’s 33-year low against the dollar. Higher T-note yields today are undercutting the yen. However, losses in the yen are minimal due to concern that any further weakening of the yen could spark intervention in the forex market by Japanese authorities to support the yen.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 1% for the April 26 meeting and 44% for the following meeting on June 14.

June gold (GCM4) today is down -65.6 (-2.72%), and May silver (SIK24) is down -1.384 (-4.80%). Precious metals this morning are sharply lower, with gold sliding to a 1-week low and silver falling to a 2-week low. A stronger dollar today is negative for metals. Also, reduced safe-haven demand has sparked long liquidation pressures for precious metals as geopolitical tensions ease in the Middle East from the absence of further escalation from Iran following Israel’s retaliatory strike last Friday. In addition, higher global bond yields today are negative for precious metals. Finally, gold prices are under pressure as funds continued to liquidate their long gold positions after long gold holdings in ETFs fell to a 4-1/2 year low last Friday.

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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.