The dollar index (DXY00) today rebounded from a 1-1/2 week low and is slightly higher.  The dollar saw support today after bond yields jumped when today’s US economic news showed signs of persistent inflation and labor market strength, hawkish factors for Fed policy.  Also, today’s slump in stocks has boosted liquidity demand for the dollar.

US weekly initial unemployment claims unexpectedly fell -5,000 to a 2-month low of 207,000, showing a stronger labor market than expectations of an increase to 215,000.

US Q1 GDP was revised downward to 1.6% (q/q annualized) from 3.4%, weaker than expectations of 2.5%, as Q1 personal consumption was revised lower to 2.5% from 3.3%, weaker than expectations of 3.0%.  The Q1 core PCE price index was revised upward to +3.7% from +2.0%, stronger than expectations of +3.4%.

US Mar pending home sales rose +3.4% m/n, stronger than expectations of +0.4% m/m.

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

EUR/USD (^EURUSD) today is up by +0.13% and posted a 2-week high.  The euro found support today after the German May GfK consumer confidence index rose more than expected to a 2-year high.  Also, hawkish comments from ECB Governing Council member Muller boosted the euro when he said he is not in favor of cutting interest rates for a second straight meeting following an expected first cut in June.  Gains in the euro are limited after the dollar strengthened on hawkish US economic news. 

The German May GfK consumer confidence index rose +3.1 to a 2-year high of -24.2, stronger than expectations of -26.0.

Swaps are discounting the chances for a -25 bp rate cut by the ECB at 85% for its next meeting on June 6.

USD/JPY (^USDJPY) today is up by +0.17%.  The yen today dropped to a new 33-year low against the dollar and is mildly lower.  Higher T-note yields today have boosted the dollar and are weighing on the yen.  Losses in the yen are limited by concern that Japanese authorities could intervene in the forex market at any time to support the yen after many Japanese officials recently said they would take necessary action to address excessive moves in the yen if needed. Also, short covering ahead of the results of Friday’s BOJ meeting are supportive for the yen.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 22% for the April 26 meeting and 59% for the following meeting on June 14.

June gold (GCM4) this morning is down -4.7 (-0.20%), and May silver (SIK24) is down -0.86 (-0.31%).  Precious metals this morning are moderately lower.  A stronger dollar today is weighing on precious metals along with higher global bond yields.  Also, today’s US economic news, showing persistent inflation and strength in the labor market, was hawkish for Fed policy and was bearish for precious metals. In addition, 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 Wednesday.  Limiting losses in precious metals is today’s slump in stocks that has boosted some safe-haven demand for precious metals. 

• What's Left in the US Dollar Seasonal Rally?
• Dollar Gains with Higher T-Note Yields and Yen Weakness
• Dollar Climbs with T-Note Yields
• Dollar Retreats as Bond Yields Fall and Stocks Rally