The dollar index (DXY00) today is up +0.11%.  The dollar is seeing support from a +4.3 bp rise in the 10-year T-note yield to 4.496%.  The dollar is also seeing support from hawkish comments today by several Fed officials and reduced expectations for Fed rate cuts.

Fed Governor Michelle Bowman issued mildly hawkish comments today when she said the Fed must maintain its inflation credibility “by proceeding carefully and deliberately to achieve our 2% goal.”  She said the Fed needs to keep rates where they are “for a bit longer.”  Also, Atlanta Fed President Raphael Bostic told Reuters in an interview that he expects only one 25 bp rate cut this year, coming late in the year.  Dallas Fed President Lorie Logan said today, “It’s just too early to think about cutting rates.”

The markets are discounting the chances for a -25 bp rate cut at 5% for the June 11-12 FOMC meeting and 29% for the following meeting on July 30-31.

The dollar was undercut by negative US economic news.  The University of Michigan’s preliminary-May US consumer sentiment index fell -9.8 points to a 6-month low of 67.4, weaker than market expectations for a -1.0 point decline to 76.2. 

EUR/USD (^EURUSD) is down -0.13%.  The euro continues to be undercut by expectations that the ECB will cut rates much sooner than the Fed. 

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 93% for its next meeting on June 6.

USD/JPY (^USDJPY) is down -0.26%.  The yen is seeing continued support from Thursday’s summary of the April 25-26 BOJ meeting, which showed BOJ board members were considering the potential for faster rate hikes if the weak yen worsened the inflation outlook. The summary said, "If underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalization will increase."

The yen continues to be undercut by 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 Tuesday that the government doesn’t need to intervene in the forex market if market movements are orderly. 

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 34% for the June 14 meeting.

June gold (GCM4) is up +29.3 (+1.25%), and July silver (SIN24) is up +0.070 (+0.25%).  Precious metals prices are seeing support from today’s dovish US consumer sentiment report and ongoing Middle East tensions.  Precious metals are showing strength despite today’s bearish factors of higher T-note yields and a mildly stronger dollar.  Fund liquidation of gold holdings is negative for gold prices after long gold holdings in ETFs fell to a 4-1/2 year low Wednesday. 

• Dollar Softens and Gold Rallies as US Jobless Claims Climb
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