The dollar index (DXY00) on Friday fell by -0.15%. Friday’s reports that showed a smaller-than-expected increase in US March consumer prices and a plunge in the University of Michigan’s US Apr consumer sentiment index to a record low weighed on the dollar. Also, hopes that this weekend’s negotiations in Pakistan between the US and Iran will lead to peace are reducing safe-haven demand for the dollar.
The dollar recovered some of its losses Friday when Iran said there must be an immediate ceasefire in Lebanon and all Iranian blocked assets must be released “before any negotiations begin.” Also, the New York Post reported that President Trump said that US warships are being reloaded with ammunition to resume strikes on Iran in case peace talks in Pakistan fail.
US Mar CPI rose +3.3% y/y, the biggest increase in two years, but below expectations of +3.4% y/y. Mar core CPI rose +2.6% y/y, below expectations of +2.7% y/y.
US Feb factory orders were unchanged m/m, stronger than expectations of a -0.2% m/m decline.
The University of Michigan US Apr consumer sentiment index fell -5.7 to a record low of 47.6 (data since 1978), weaker than expectations of 51.5.
The University of Michigan US Apr 1-year inflation expectations rose to an 8-month high of4.8%, stronger than expectations of 4.2%. The Apr 5-10 year inflation expectations rise to a 5-month high of 3.4%, right on expectations.
Swaps markets are discounting the odds at 2% 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) climbed to a 5-week high on Friday and finished up by +0.26%. Dollar weakness on Friday was supportive of the euro. Also, higher government bond yields are bullish for the euro, as the 10-year German Bund yield rose +7 bp on Friday to 3.06%.
Swaps are discounting a 34% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) on Friday rose by +0.20%. The yen retreated on Friday after the Nikkei Stock Index rallied to a 5-week high, which reduced safe-haven demand for the yen. Also, higher T-note yields on Friday were bearish for the yen. Losses in the yen were limited after Japan’s March producer prices rose more than expected, a hawkish factor for BOJ policy.
Japan Mar PPI rose +0.8% m/m and +2.6% y/y, stronger than expectations of +0.7% m/m and +2.3% y/y.
The markets are discounting a +55% chance of a 25 bp BOJ rate hike at the next meeting on April 28.
June COMEX gold (GCM26) on Friday closed down -30.60 (-0.64%), and May COMEX silver (SIK26) closed up +0.042 (+0.05%).
Gold and silver prices settled mixed on Friday. Higher global bond yields on Friday weighed on precious metals prices. Also, Friday’s report that showed US Mar CPI rose by the most in two years may prompt the Fed to tighten monetary policy, a negative factor for precious metals. In addition, hopes that this weekend’s negotiations between the US and Iran will lead to a diplomatic resolution to the war have curbed some safe-haven demand for precious metals.
Losses in precious metals were limited on Friday due to a weaker dollar. Precious metals also continue to see strong safe-haven demand amid the ongoing war in Iran. In addition, 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 +160,000 ounces to 74.38 million troy ounces in March, the seventeenth consecutive month the PBOC has boosted its gold reserves.
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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