The dollar index (DXY00) today is down by -0.73%.  The dollar is under pressure today on reduced safe-haven demand as news of possible US-China trade talks sparked a rally in stocks that boosted risk sentiment.  The dollar also fell after US Apr average hourly earnings rose less than expected, a dovish factor for Fed policy.  However, on the positive side for the dollar, US Mar factory orders posted their largest increase in 8 months, and Apr nonfarm payrolls rose more than expected, a sign of labor market strength that is hawkish for Fed policy. 

US Apr nonfarm payrolls rose +177,000, stronger than expectations of +138,000, although Mar nonfarm payrolls were revised lower by 43,000 jobs to +185,000 from the previously reported +228,000.  The Apr unemployment rate was unchanged at 4.2%, right on expectations.

US Apr average hourly earnings rose +0.2% m/m and +3.8% y/y, slightly weaker than expectations of +0.3% m/m and +3.9% y/y.

US Mar factory orders rose +4.3% m/m, the largest increase in 8 months.

China’s Commerce Ministry is assessing the possibility of trade talks with the US.  It said, “The US has recently sent messages to China through relevant parties, hoping to start trade talks with China, and we are currently evaluating this.”

The markets are discounting the chances at 3% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week.

EUR/USD (^EURUSD) today is up by +0.61%.  The euro is garnering support today from a weaker dollar. Also, today’s Eurozone economic news is supporting the euro after upward revisions for the core CPI and S&P manufacturing PMI reports, and an unchanged Eurozone unemployment rate at a record low. 

The Eurozone Apr core CPI was revised upward to 2.7% y/y from the previously reported 2.4% y/y.

The Eurozone Apr S&P manufacturing PMI was revised upward by +0.3 to 49.0 from the previously reported 48.7.

The Eurozone Mar unemployment rate was unchanged at a record low 6.2%.

Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

USD/JPY (^USDJPY) today is down by -0.89%.  The yen recovered from a 3-week low against the dollar today and is moderately higher.  Short covering emerged in the yen today after Japanese Finance Minister Kato said that Japan’s Treasury holdings, the most held by any nation, could be a card in its trade talks with the US.  The selling of Japan’s Treasury holdings and repatriation back into yen assets would be a supportive factor for the yen. 

Gains in the yen are limited after the Japan Mar jobless rate unexpectedly rose, a dovish factor for BOJ policy.  Also, today’s rally in the Nikkei Stock Index to a 5-week high has reduced safe-haven demand for the yen.  In addition, higher T-note yields today are negative for the yen. 

The Japan Mar jobless rate unexpectedly rose +0.1 to 2.5%, showing a weaker labor market than expectations of no change at 2.4%. 

June gold (GCM25) today is up +36.60 (+1.14%), and July silver (SIN25) is down -0.094 (-0.29%).  Precious metals prices today are mixed.   Today’s weaker dollar is supporting moderate gains in precious metals.  Also, precious metals prices have continued support from geopolitical risks in the Middle East as the Israel-Hamas and the US-Houthi conflicts continue.  Gains in precious metals are limited by reduced safe-haven demand in hopes for a thaw in the US-China trade war after China’s Commerce Ministry said it is assessing the possibility of trade talks with the US.  Higher T-notes yields today are also negative for precious metals.  In addition, today’s stock rally has curbed safe-haven demand for precious metals. 

Silver prices garnered support today from positive global economic news.  US Apr nonfarm payrolls rose more than expected, and US Mar factory orders posted their biggest increase in 8 months.  Also, the Eurozone Apr S&P manufacturing PMI was revised upward, which supports industrial metals demand.