The dollar index (DXY00) fell to a 1.5-week low on Monday and finished down by -0.65%. The dollar gave up overnight gains and turned lower as stocks rallied sharply after President Trump postponed attacks against Iranian energy infrastructure and power plants for five days following the start of talks with Iran to end the war, curbing liquidity demand for the dollar. The dollar added to its losses on Monday amid weaker-than-expected US economic news, including the Feb Chicago Fed National Activity index and Jan construction spending.
The US Feb Chicago Fed National Activity Index fell -0.31 to -0.11, weaker than expectations of 0.16.
US Jan construction spending unexpectedly fell -0.3% m/m, weaker than expectations of a +0.1% m/m increase.
Swaps markets are discounting the odds at 8% 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 Monday recovered from overnight losses and rallied to a 1.5-week high and finished up by +0.44%. The euro moved higher on Monday as the dollar tumbled after President Trump postponed strikes on Iranian energy infrastructure, citing “very good” talks to end the war. The euro added to its gains today after crude oil prices plunged more than -10%, a positive factor for the Eurozone economy, as Europe imports most of its energy needs. Gains in the euro were limited after the Eurozone Mar consumer confidence index fell more than expected to a nearly 2.5-year low.
ECB Governing Council member Peter Kazimir said, “The ECB can do little about the inflation spike in the next few months, but if we judge that the risk of inflation remaining above our target for a prolonged period is significant, we will act with appropriate forcefulness to bring inflation back down to our target.”
The Eurozone Mar consumer confidence index fell -4.0 to a nearly 2.5-year low of -16.3, weaker than expectations of -14.2.
Swaps are discounting a 68% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
Source: finance.yahoo.com
