US dollar resumes gains before spending data
The US dollar rose in European trade on Friday against a basket of major rivals, resuming gains after a short hiatus and about to touch three-week highs, and on track for the second weekly profit in row.
Now investors await important US consumer spending data later today, which would help define fresh pricing for Fed rate cuts this year.
The Index
The dollar index rose 0.2% today to 104.50, with a session-low at 104.20.
On Thursday, the index lost 0.4% on profit-taking away from three-week highs at 104.68.
Weekly Trades
The dollar index is up 0.4% so far this week on track for the second weekly profit in a row.
Auto Tariffs
US President Donald Trump announced aggressive 25% tariffs on imported cars and auto parts starting next week.
Canadian Prime Minister Mark Carney asserted that Canada will respond to this “attack” with new trade measures.
Investors worry that upcoming reciprocal tariffs by Trump next week will raise inflation even further and slow economic growth.
US Rates
Minneapolis Fed President Neil Kashkari said even as the Fed achieved a log of progress in containing inflation, there’s still more work to do to bring inflation to the 2% target.
Richmond Fed President Thomas Parkin said that current “moderately restrictive” monetary policies by the Federal Reserve are appropriate amid rising uncertainty and rapid changes in US government policies.
According to the Fedwatch tool, the odds of a May 0.25% Fed rate cut stood at 12%.
The odds of a similar cut in June stood at a much higher 65%.
Gold hits fresh record high near $3100
Gold prices rose in European trade on Friday and expanded the gains for the second straight session, hitting a fresh record high on track for trading above $3100 for the first time ever, while heading for the fourth weekly profit in a row.
The gains come amid increasing haven demand on the metal with mounting global trade tensions after Donald Trump’s aggressive auto tariffs.
The Price
Gold prices rose 0.95% today to $3086 an ounce, a record high, with a session-low at $3054.
On Thursday, prices rose 1.25% to a new record high amid concerns about a total global trade war.
Weekly Trades
Gold prices are up 2% so far this week on track for the fourth weekly profit in a row.
Global Trade Tensions
US President Donald Trump announced aggressive 25% tariffs on imported cars and auto parts starting next week.
Canadian Prime Minister Mark Carney asserted that Canada will respond to this “attack” with new trade measures.
Investors worry that upcoming reciprocal tariffs by Trump next week will raise inflation even further and slow economic growth.
US Rates
Minneapolis Fed President Neil Kashkari said even as the Fed achieved a log of progress in containing inflation, there’s still more work to do to bring inflation to the 2% target.
Richmond Fed President Thomas Parkin said that current “moderately restrictive” monetary policies by the Federal Reserve are appropriate amid rising uncertainty and rapid changes in US government policies.
According to the Fedwatch tool, the odds of a May 0.25% Fed rate cut stood at 12%.
The odds of a similar cut in June stood at a much higher 65%.
SPDR
Gold holdings at the SPDR Gold Trust rose 0.29 tons yesterday to a total of 929.65 tons.
Euro about to mark second weekly loss in row
Euro fell in European trade on Friday against major rivals, resuming losses against the dollar after a short hiatus yesterday and trading near three-week lows, and about to mark the second weekly loss in a row.
Recent data showed Spanish inflation slowed down more than expected, with traders now awaiting inflation data for Germany and the whole eurozone next week to gather more clues on the future path of ECB rate cuts.
Euro’s decline comes as traders assess the mounting trade risks after Trump imposed 25% on imported cars.
The Price
The EUR/USD price fell 0.25% today to $1.0775, with a session-high at $1.0801.
The pair closed up 0.45% on Thursday, the first profit in seven days, away from three-week lows at $1.0732.
Weekly Trades
The EUR/USD price is down 0.5% so far this week, on track for the second weekly loss in a row.
Spanish Inflation
Recent data showed consumer prices rose 2.3% y/y in March, below estimates of 2.6%, and after a 3% rise in February.
The data would reduce inflationary pressures on European Central Bank policymakers, ahead of similar inflation data for Germany and the eurozone next week.
European Rates
Following the data, the odds of an ECB 0.25% interest rate cut in April rose from 40% to 43%.
ECB officials warned that the trade war with the US could impact eurozone inflation transiently, but the biggest impact will be on growth.
Trump’s Tariffs
US President Donald Trump’s latest tariffs raised trade concerns, as the recent tariffs target the vital eurozone automotive industry.
Trump signed an order imposing 25% tariffs on all imported vehicles, to be enforced on April 2nd, which would lead to the most profound transformation in the history of the US auto sector.
Yen tries to recover as Tokyo inflation accelerates
The Japanese yen rose in European trade on Friday against a basket of major rivals, while recovering from three-week lows against the dollar, however, the yen is still heading for the third weekly loss in a row.
Earlier Tokyo data showed inflation accelerated in March in another sign of increasing pressures on the Bank of Japan policymakers.
Recent BOJ minutes showed mixed views between members on the timing of the next rate hike, with some focusing on the rising inflationary pressures in the country, while others cautioned against global trade uncertainties.
The Price
The USD/JPY fell 0.25% today to 150.70, with March 3 highs at 151.21.
The yen lost 0.35% on Wednesday against the dollar, the third loss in a row under pressure from higher US yields.
Weekly Trades
The yen is down 0.95% so far this week against the dollar, on track for the third weekly loss in a row.
Main Inflation
Earlier data showed Tokyo consumer prices rose 2.4% in March, accelerating from 2.3% in February, and above estimates of 2.3%.
BOJ Mixed Views
The Bank of Japan’s latest meeting minutes showed disagreements on the path forward for interest rate hike.
Some members focused on inflationary pressures as a reason to hike rates soon and protect consumers, especially as major corporations agree on huge wage increases this year.
Others are focusing on US trade tariffs and their likely negative impact on the Japanese economy, which would require caution in the timing of rate hikes.
Japanese Rates
Following the latest Tokyo data, the odds of a Bank of Japan 0.25% rate hike in May rose slightly to 45%, with investors now waiting for more inflation, unemployment, and wages data from Japan to gather more clues.
A Reuters survey showed analysts expect the next interest rate hike by the BOJ to occur in the third quarter, likely in July.
Bank of Japan Governor Kazuo Ueda said ahead of the Diet that the BOJ should hike interest rates if food prices continue to rise and lead to wide-spread national inflation.
He said that recent “very high inflation” in Japan is likely prompted by transient factors, such as higher import and good costs, which will likely dissipate and shouldn’t impact monetary policies.