The dollar index (DXY00) today is down by -0.38%.  The dollar today is mildly lower after the US Apr CPI was weaker-than-expected and showed the smallest increase in 4 years, a dovish factor for Fed policy.  Also, weaker T-note yields today have weakened the dollar’s interest rate differentials.  In addition, strength in stocks has curbed liquidity demand for the dollar.

US Apr CPI rose +2.3% y/y, slightly weaker than expectations of +2.4% y/y and the smallest year-on-year increase in 4 years.  Apr CPI ex-food and energy rose +2.8% y/y, unchanged from March and right on expectations. 

The markets are discounting the chances at 8% for a -25 bp rate cut after the June 17-18 FOMC meeting.

EUR/USD (^EURUSD) today is up by +0.41%.  Today’s weaker dollar is supportive of the euro.  Also, today’s economic news showed the German May ZEW survey expectations of economic growth rose more than expected, which is bullish for the euro.  In addition, today’s increase in the 10-year German bund yield to a 1-month high strengthened the euro’s interest rate differentials.

Trade concerns between the US and EU are limiting gains in the euro after Treasury Secretary Bessent said the European Union suffers from a “collective action problem” that’s hampering trade negotiations and trade talks between the US and Europe “may be a bit slower.”

The German May ZEW survey expectations of economic growth rose +39.2 to 25.2, stronger than expectations of 11.3.

Swaps are discounting the chances at 87% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

USD/JPY (^USDJPY) today is down by -0.34%.  The yen is climbing against the dollar today due to the hawkish summary of the April 30-May 1 BOJ meeting where policymakers said they remain committed to raising interest rates and normalizing monetary policy.  Also, comments today from BOJ Deputy Governor Uchida were bullish for the yen when he reiterated the BOJ’s stance to raise interest rates once its economic outlook is met.   In addition, lower T-note yields today are supportive of the yen.

The April 30-May 1 BOJ meeting summary was hawkish as the summary said, “The BOJ’s stance to continue the policy interest rate is unchanged,” given low real rates and the outlook for the price goal to be met.

June gold (GCM25) today is up +16.20 (+0.50%), and July silver (SIN25) is up +0.256 (+0.78%).  Precious metals today are moving higher and recovered some of Monday’s sharp selloff.  Today’s weaker dollar is supportive of precious metals. Also, today’s Fed-friendly US Apr CPI report is dovish for Fed policy, a bullish factor for precious metals.  In addition, lower T-note yields today are positive for the demand for precious metals.  Finally, geopolitical risks in the Middle East continue to support safe-haven demand for precious metals as the Israel-Hamas conflict continues and as Israel recently launched an airstrike on Houthi rebels in Yemen.

Strength in stocks today has reduced some safe-haven demand for precious metals.  Also, the easing of US-China trade tensions has fueled long liquidation in precious metals after China and the US agreed to reduce tariffs on each other’s goods.  In addition, an easing of global geopolitical risks is bearish for precious metals after India and Pakistan agreed to an immediate ceasefire, and Ukraine President Zelenskiy said he would travel to Istanbul on Thursday for direct negotiations with Russian President Putin.