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Dollar Climbs with T-Note Yields

Barchart - Wed Apr 24, 9:48AM CDT

The dollar index (DXY00) today recovered from an early 1-1/2 week low and is up +0.12%. The dollar is seeing support from higher T-note yields but is being undercut by reduced liquidity demand due to today’s rally in stocks.  The yen today fell to a 33-year low against the dollar.

US Mar capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.2% m/m, right on expectations.

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 16% for the following meeting on June 11-12.

EUR/USD (^EURUSD) today is down by -0.05%.   The euro today fell back from a 1-1/2 week high and is mildly lower.  Strength in the dollar today is undercutting the euro. Also, divergence between the ECB and Fed is weighing on the euro, with the ECB expected to start cutting interest rates in June while the Fed delays rate cuts until later in the year.

The euro today initially moved higher after the German Apr IFO business climate index rose more than expected to an 11-month high.  Also, hawkish comments from ECB Governing Council member Nagel were bullish for the euro when he said an ECB rate cut in June doesn’t have to kick off a series of rate cuts.

The German Apr IFO business climate index rose +1.5 to an 11-month high of 89.4, stronger than expectations of 88.8.

ECB Governing Council member and Bundesbank president Nagel said a June rate cut by the ECB "won't necessarily" start a series of rate cuts.

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 +0.11%.  The yen today tumbled to a new 33-year low against the dollar and is moderately lower.  Higher T-note yields and dollar strength today are weighing on the yen.  Also, today’s +2% rally in the Nikkei Stock Index has reduced safe-haven demand for the yen.  Losses in the yen are contained on concern that Japanese authorities could intervene in the forex market at any time to support the yen after many Japanese officials recently said they will take necessary action to address excessive moves in the yen if needed.

Japan Mar PPI services prices rose +2.3% y/y, stronger than expectations of +2.1% y/y.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 1% for the April 26 meeting and 43% for the following meeting on June 14.

June gold (GCM4) this morning is down -11.1 (-0.47%), and May silver (SIK24) is down -0.202 (-0.74%).  Precious metals today are moderately lower.  A stronger dollar today is bearish for precious metals. Also, higher global bond yields today and stock strength are weighing on precious metals.  Gold prices are also under pressure due to hawkish comments from ECB Governing Council member Nagel, who said an ECB rate cut in June doesn’t mean the ECB will begin a series of rate cuts.



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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.

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