The dollar index (DXY00) fell 0.26% today as softer‑than‑expected U.S. inflation and consumer sentiment data undermined the currency. A smaller increase in March consumer prices and a sharp drop in the University of Michigan’s April consumer sentiment index to a record low curbed demand for the dollar as a safe haven.
U.S. March CPI rose 3.3% year‑over‑year, the biggest increase in two years, but missed the 3.4% forecast. Core CPI increased 2.6% y/y, beneath the expected 2.7% y/y.
The University of Michigan’s April consumer sentiment index fell 5.7 points to a record low of 47.6, weaker than the expected 51.5. One‑year inflation expectations for April rose to an eight‑month high of 4.8%, above the 4.2% forecast, while five‑to‑ten‑year inflation expectations climbed to a five‑month high of 3.4%, right on expectations.
Swaps markets price a 2% chance of a 25‑bp rate hike at the April 28‑29 FOMC meeting. The dollar is also under pressure from a diverging rate outlook: the FOMC is seen to cut rates by at least 25 bp in 2026, while the BOJ and ECB are seen to raise by at least 25 bp in the same period.
EUR/USD rose 0.31% to a five‑week high, supported by dollar’s weakness and higher German bund yields, which climbed 6 bp to 3.05%. Swaps indicate a 31% probability of an ECB rate hike at the April 30 policy meeting.
USD/JPY edged up 0.10%. The yen slipped after the Nikkei surged to a five‑week high, cutting down safe‑haven demand for the currency, while higher U.S. Treasury yields weighed on the currency. Losses in the yen are limited after Japan’s March producer prices rose more than anticipated, a hawkish factor for BOJ policy.
Japan’s March PPI rose 0.8% m/m and 2.6% y/y, surpassing expectations of 0.7% m/m and 2.3% y/y. The markets are discounting a 55% chance of a 25 bp BOJ rate hike at the next gathering on April 28.
June COMEX gold (GCM26) fell 18.20 (-0.38%), and May COMEX silver (SIK26) dropped 0.048 (-0.06%). Gold and silver prices moved lower today as strength in stocks has decreased safe‑haven demand for precious metals. Higher global bond yields today are weighing on precious metals. In addition, today’s report that U.S. Mar CPI rose by the most in two years may cause the Fed to tighten monetary policy, a negative factor for precious metals. Finally, hopes for this weekend’s negotiations between the U.S. and Iran leading to a diplomatic solution to the war have curbed some safe‑haven demand for precious metals.
Precious metals losses are limited today due to a weaker dollar. Precious metals also continue to see strong safe‑haven demand amid ongoing war in Iran. In addition, uncertainty over U.S. tariffs, U.S. political turmoil, large U.S. deficits, and government policy uncertainty are boosting demand for precious metals as a store of value.
Recent fund liquidations of precious metals are bearish for prices, as long positions in gold ETFs fell to a 3.75‑month low last Tuesday after climbing to a 3.5‑year high on February 27. Also, long positions in silver ETFs dropped to a 6.5‑month low on March 27 after rising to a 3.5‑year peak on December 23.
Strong central bank demand for gold remains supportive of gold prices, following 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.
