The dollar index has increased by 0.45% today, driven by President Trump’s recent decision to extend the deadline for a 50% tariff on European goods from June 1 to July 9. This development, combined with comments from Minneapolis Fed President Neel Kashkari advocating for maintaining the current federal funds rate, has bolstered the dollar further. The dollar also gained traction following an unexpected rise in the Conference Board’s consumer confidence index for May, which reached a three-month high.
However, the dollar’s upward momentum is somewhat restrained due to a decline in U.S. capital goods orders, excluding defense and aircraft, which fell by 1.3% month-over-month in April, surpassing expectations of a 0.2% drop. Additionally, a stock market rally has reduced liquidity demand for the dollar. The currency is still feeling the effects of a recent tax and spending plan passed by the House, which could exacerbate the ongoing U.S. budget deficit.
Meanwhile, the euro is down by 0.27% against the dollar. The strength of the euro is partially shielded by positive economic news from the Eurozone, which showcased robust economic performance. Furthermore, hawkish remarks from ECB Governing Council member Robert Holzmann also lent support to the euro, as he does not favor further interest rate cuts from the European Central Bank.
In May, the Eurozone’s economic confidence indicator rose by 1.0 to 94.8, exceeding the expected 94.1. Additionally, new car registrations in the Eurozone increased year-over-year in April, marking the first growth in four months. Holzmann, addressing the ECB’s interest rates, cautioned that decreasing rates further might pose higher risks than maintaining the current levels until the upcoming September meeting.
The market is signaling a 97% probability of a 25 basis point rate cut by the ECB during the policy meeting scheduled for June 5. Transitioning to the Japanese yen, it has appreciated by 1.06% today. The yen’s initial rally to a four-week high against the dollar was influenced by a report indicating a potential reduction in government bond issuance from Japan’s finance ministry.
This followed better-than-expected rising prices in Japan’s April Producers Price Index (PPI), which may influence Bank of Japan (BOJ) monetary policy. BOJ Governor Kazuo Ueda reiterated that the bank will continue tightening its monetary policy as conditions allow. The April PPI services prices reflected a year-over-year increase of 3.1%, slightly outperforming expectations of 3.0%.
Today’s data suggests that the BOJ is poised to adjust monetary easing measures as necessary to ensure price stability, depending on incoming economic indicators. In the precious metals market, June gold futures are down 2.07% and July silver futures have decreased by 1.16%. The downturn in precious metals is attributed to easing trade tensions after the tariff deadline extension by President Trump, alongside the strengthening dollar and a significant stock market rally that diminished safe-haven demand for these assets.
Further, hawkish statements from various central bank officials have maintained pressure on precious metals, as both Kashkari and Holzmann support holding interest rates steady, while Ueda confirmed ongoing rate increases by the BOJ as long as economic conditions align with their goals.
The decline in U.S. economic indicators, including a notable drop in capital goods orders and a modest increase in the S&P CoreLogic composite-20 home price index, has further impacted the demand for industrial metals and silver prices. Nevertheless, lower global bond yields are providing some support for precious metals, as ongoing geopolitical tensions in the Middle East continue to drive safe-haven buying.
Although gains in silver are limited due to fears that escalating global trade conflicts might undermine economic activity and reduce industrial metal demand, the precious metals market is navigating through various economic signals and central bank strategies, indicating a complex trading environment.
