The dollar index (DXY00) on Monday fell by -0.24%.  The dollar gave up an early advance on Monday and fell to a 1.25-month low after stocks recovered when President Trump said that Iran still wanted to make a deal and reached out to the US over peace negotiations as the US began a naval blockade of the Strait of Hormuz.   The dollar also fell on Monday after US Mar existing home sales fell more than expected to a 9-month low.  The dollar initially moved higher on Monday after the US-Iran peace talks broke down over the weekend and President Trump ordered a naval blockade of the Strait of Hormuz, raising the risk of a further escalation of hostilities in the Middle East. 

President Trump ordered a blockade of the Strait of Hormuz following the deadlocked peace talks over the weekend between the US and Iran.  President Trump said the US will begin a full naval blockade of the Strait of Hormuz today and threatened to retaliate in the event of Iranian resistance. Iran said it would target all ports in and close to the Persian Gulf if its own shipping hubs are threatened. 

US Mar existing home sales fell -3.6% m/m to a 9-month low of 3.98 million, weaker than expectations of 4.05 million.

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) on Monday rose by +0.29%.  The euro erased early losses on Monday and rallied to a 1.25-month high after the dollar gave up early gains and turned lower.  The euro initially fell on Monday amid a jump in crude oil prices.  Higher crude oil prices are negative for the Eurozone economy and the euro, as Europe imports most of its energy.

Swaps are discounting a 42% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.

USD/JPY (^USDJPY) on Monday rose by +0.06%.  The yen came under pressure on Monday after comments from BOJ Governor Ueda reduced the chances of a BOJ interest rate increase later this month to 35% from 55% on Friday when he signaled a more cautious stance on monetary policy due to the impact of the US-Iran war.  Also, Monday's +2% jump in crude oil prices is negative for the Japanese economy and the yen, as Japan imports more than 90% of its energy needs.  The yen recovered from its worst level on Monday after T-note yields gave up an early advance and moved lower, a supportive factor for the yen.

BOJ Governor Kazuo Ueda said, "Looking ahead, developments in the Middle East remain uncertain, and we will closely monitor them and their potential impact on economic activity, prices, and financial conditions."

The markets are discounting a +35% chance of a 25 bp BOJ rate hike at the next meeting on April 28.

June COMEX gold (GCM26) on Monday closed down -20.00 (-0.42%), and May COMEX silver (SIK26) closed down -0.815 (-1.07%).

Gold and silver prices settled lower on Monday, with gold sliding to a 1-week low.  Monday's +2% rally in crude oil prices raises inflation risks and may prompt the world's central banks to pursue tighter monetary policies, a bearish factor for precious metals.  Silver prices also came under pressure on Monday after US Mar existing home sales fell more than expected to a 9-month low, a negative factor for industrial metals demand.

Precious metals recovered from their worst levels on Monday after the dollar gave up an early advance and turned lower.  Also, concerns about the escalation of the US-Iran war boosted some safe-haven demand for precious metals after President Trump ordered a full naval blockade of the Strait of Hormuz.  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 4-month low on March 31 after climbing to a 3.5-year high on February 27.  Also, long holdings in silver ETFs fell to a 7-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.