Dollar Slips on Hopes of a Ceasefire in Iran

The dollar index (DXY00) today is down by -0.15%.  The dollar is under pressure today as stocks recover on hopes for a ceasefire in Iran, curbing liquidity demand for the dollar. Axios reported that the US, Iran, and a group of regional mediators are discussing the terms for a potential 45-day ceasefire that could lead to a permanent end to the war.  The dollar added to its losses today after the Mar ISM services index fell more than expected. 

The US Mar ISM services index fell -2.1 to 54.0, weaker than expectations of 54.9.  The Mar ISM services prices paid sub index rose +7.7 to a 3.5-year high of 70.7, stronger than expectations of 67.0.

Swaps markets are discounting the odds at 1% for a +25 bp rate hike at the April 28-29 FOMC meeting.

The dollar continues to be undercut by a poor outlook for interest rate differentials, with the FOMC expected to cut interest rates by at least -25 bp in 2026, while the BOJ and ECB are expected to raise rates by at least +25 bp in 2026. 

EUR/USD (^EURUSD) today is up by +0.37%.  The euro is rising today amid a weaker dollar.  Market activity is well below normal today, with markets in Europe closed for the Easter Monday holiday.

Swaps are discounting a 50% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.

USD/JPY (^USDJPY) is down today by -0.13%.  Today’s weaker dollar is supportive of the yen.  Also, rising Japanese government bond yields are boosting the yen’s interest rate differentials after the 10-year JGB bond yield climbed to a 27-year high of 2.432% today. 

The markets are discounting a +65% chance of a 25 bp BOJ rate hike at the next meeting on April 28.

June COMEX gold (GCM26) today is up +16.10 (+0.34%), and May COMEX silver (SIK26) is down -0.444 (-0.61%).

Gold and silver prices are mixed today.  Dollar weakness and lower T-note yields today are supportive of metals.  Precious metals also have safe-haven support after President Trump threatened to unleash “all hell” on Iran if the Strait of Hormuz is not reopened to all shipping traffic by Tuesday. 

Gains in precious metals are limited amid reduced safe-haven demand after stock prices rose today on an Axios report that said the US, Iran, and a group of regional mediators are discussing the terms for a potential 45-day ceasefire that could lead to a permanent end to the war.

Precious metals have safe-haven support amid concerns about the escalation of the war in the Middle East. Saudi Arabia agreed to give the US military access to King Fahd Air Base, and the UAE said Iranian nationals aren’t allowed to enter or transit the country.  Iran’s Middle Eastern neighbors are growing frustrated with Iran, which has responded to US and Israeli attacks by hitting targets in several nearby nations. 

Precious metals continue to see strong safe-haven demand amid the ongoing war in Iran.  Also, uncertainty over US tariffs, US political turmoil, large US deficits, and government policy uncertainty are boosting demand for precious metals as a store of value.

Recent fund liquidation of precious metals is bearish for prices, as long holdings in gold ETFs fell to a 3.75-month low last Tuesday after climbing to a 3.5-year high on February 27.  Also, long holdings in silver ETFs fell to a 6.5-month low on March 27 after rising to a 3.5-year high on December 23.

Strong central bank demand for gold is supportive of gold prices, following the recent news that bullion held in China’s PBOC reserves rose by +30,000 ounces to 74.22 million troy ounces in February, the sixteenth consecutive month the PBOC has boosted its gold reserves.