The dollar index (DXY00) this morning is down -0.14% at a 1-week low.  The dollar today is mildly lower, weighed down by the strength of the euro.  The dollar extended its losses after Fed Chair Powell said he doesn’t see the Fed’s next move as a rate hike. 

US Apr PPI final demand rose +2.2% y/y, which was right on expectations.  The Apr PPI ex-food and energy rose +2.4% y/y, unchanged from March but slightly stronger than expectations of +2.3% y/y.

Fed Chair Powell said, "Q1 in the US was notable for lack of inflation progress, and that told us that we'll need to be patient and let restrictive policy do its work." He added, "I don't think it's likely that the next move would be a rate hike, but it is more likely that we will hold the policy rate where it is."

The markets are discounting the chances for a -25 bp rate cut at 10% for the June 11-12 FOMC meeting and 34% for the following meeting on July 30-31.

EUR/USD (^EURUSD) today climbed to a 1-week high and is up +0.24%. The euro is moving higher today after the German May ZEW survey expectations of economic growth index rose more than expected to a 2-1/4 year high.  The euro also found support on hawkish comments from ECB Governing Council member Wunsch, who said the ECB shouldn't rush into further interest rate cuts after a likely first cut in June.

The German May ZEW survey expectations of economic growth index rose +4.2 to a 2-1/4 year high of 47.1, stronger than expectations of 46.4.

ECB Governing Council member Wunsch said the ECB shouldn't rush into further interest rate cuts after a likely first cut in June as "wage pressures still persist, which is keeping inflation high in the services sector."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 94% for its next meeting on June 6.

USD/JPY (^USDJPY) today is up by +0.16%.  The yen fell to a 1-1/2 week low against the dollar today and remains under pressure on speculation that Japanese authorities won’t intervene again in the forex market anytime soon to support the yen after Masato Kanda, Japan’s top currency official, said last Tuesday that the government doesn’t need to intervene in the forex market if market movements are orderly.  The yen found support today from higher Japanese government bond yields after the 10-year JGB bond yield matched an 11-year high of 0.974%.

Today’s Japanese economic news was mixed for the yen.  On the negative side, Japan's Apr machine tool orders fell -11.6% y/y, the sixteenth consecutive month orders have declined.  Conversely, Japan's Apr PPI rose +0.9% y/y, unchanged from March and slightly stronger than expectations of +0.8% y/y.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 39% for the June 14 meeting.

June gold (GCM4) this morning is up +13.8 (+0.59%), and July silver (SIN24) is up +0.177 (+0.62%).  Precious metals prices today are moderately higher.  A weaker dollar today is supportive of precious metals.  Also, ongoing Middle East tensions have boosted safe-haven support demand for precious metals. Gold prices extended their gains after Fed Chair Powell said he doesn’t see the Fed’s next move as a rate hike.  Silver has carryover support from today’s +2% rally in copper prices to a 2-year high. 

Gains in precious metals today are limited after the US Apr core PPI rose slightly more than expected, which was hawkish for Fed policy.  Fund liquidation of gold holdings is negative for gold after long gold holdings in ETFs fell to a 4-1/2 year low Monday.

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