The dollar index (DXY00) on Thursday rose by +0.36%. Thursday's decline in equity markets boosted liquidity demand for the dollar. Also, Wednesday night's comments from President Trump that the Iran war could escalate have boosted demand for the dollar as a safe-haven. The dollar added to its gains on Thursday on better-than-expected US economic news on weekly jobless claims and the Feb trade deficit.
During a speech to the American public on Wednesday evening, Mr. Trump pledged more aggressive action against Iran over the next two to three weeks and offered no concrete plans to reopen the Strait of Hormuz.
US weekly initial unemployment claims unexpectedly fell -9,000 to a 2.5-month low of 202,000, showing a stronger labor market than expectations of an increase to 212,000.
The US Feb trade deficit was -$57.3 billion, narrower than expectations of -$60.6 billion.
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 Thursday fell by -0.45%. The euro was under pressure on Thursday from a stronger dollar. Also, Thursday's +11% surge in crude oil prices to a 3.5-week high is negative for the euro and the Eurozone economy, which imports most of its energy needs.
Swaps are discounting a 50% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) on Thursday rose by +0.49%. The yen moved lower on Thursday amid a stronger dollar. Also, Thursday's +11% surge in crude oil prices is negative for the yen and the Japanese economy, which imports 90% of its energy needs.
The markets are discounting a +67% chance of a 25 bp BOJ rate hike at the next meeting on April 28.
June COMEX gold (GCM26) on Thursday closed down -133.40 (-2.77%), and May COMEX silver (SIK26) closed down -3.154 (-4.15%).
Gold and silver prices settled sharply lower on Thursday, pressured by a stronger dollar. Precious metals also sold off on Thursday after President Trump's comments on Wednesday evening signaled that the Iran war will continue. The ongoing war is pushing crude oil prices sharply higher, boosting inflation and potentially prompting the world's central banks to tighten monetary policy, a negative factor for precious metals.
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 3.5-month low on Tuesday after climbing to a 3.5-year high on February 27. Also, long holdings in silver ETFs fell to a 6.25-month low last Friday 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.
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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