The dollar index (DXY00) on Monday fell slightly by -0.04%.  The dollar on Monday gave up an early advance and moved lower after a rally in stocks curbed liquidity demand for the dollar. The dollar initially posted moderate gains on Monday due to higher T-note yields.  Also, today’s US Mar Chicago Fed national activity index was stronger than expected and boosted 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) on Monday fell by -0.02%.   The euro on Monday posted modest losses due to policy divergence between the ECB and the Fed, with the ECB expected to begin cutting interest rates at its June meeting while the Fed is expected to delay cutting rates.  Also, dovish comments from ECB Governing Council member Centeno weighed on the euro when he 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 88% for its next meeting on June 6.

USD/JPY (^USDJPY) on Monday rose by +0.14%.  The yen Monday dropped to a new 33-year low against the dollar. Higher T-note yields on Monday undercut the yen.  However, losses in the yen were 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) Monday closed down -67.4 (-2.79%), and May silver (SIK24) closed down -1.599 (-5.53%).  Precious metals Monday sold off sharply, with gold sliding to a 1-week low and silver falling to a 2-week low.  Reduced safe-haven demand sparked long liquidation pressures for precious metals as geopolitical tensions eased in the Middle East from the absence of further escalation from Iran following Israel’s retaliatory strike last Friday.  Also, higher T-note yields on Monday were negative for precious metals.  In addition, Monday’s rally in stocks curbed safe-haven demand 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. 

• Dollar Climbs with T-Note Yields
• Dollar Little Changed on Lower Bond Yields and Stock Weakness
• Why is Gold Ignoring Higher Rates and a Stronger Dollar?
• Stocks Fall Back on Middle East Tensions and Chip Stock Weakness