The dollar index (DXY00) today is down by -0.32%.  The dollar is under pressure today after Bloomberg reported that the US and South Korea held forex talks on May 5, sparking speculation President Trump is open to a weaker dollar.  Strength in stocks today has also reduced liquidity demand for the dollar. The dollar recovered from its worst level today on hawkish comments from Fed Vice Chair Jefferson, who said inflation could rise from US tariff policies.

Bloomberg reported today that the US and South Korean governments discussed currency policies earlier this month, bolstering speculation the Trump administration is open to a weaker dollar and will make exchange rates a feature of upcoming trade talks.  President Trump and other administration officials have argued that weakness in Asian currencies versus the dollar has given regional exporters an unfair advantage over US rivals.

Fed Vice Chair Jefferson said he's lowered his 2025 US growth forecast but still sees expansion and, "If the increase in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation.

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 +0.21%.  The euro today is mildly higher due to the weakness of the dollar.  Also, today's 10-year German bund yield increase to a 1-month high strengthened the euro's interest rate differentials and supported the euro.

Trade concerns between the US and EU are limiting gains in the euro after President Trump said the European Union is "nastier than China" in trying to forge a trade deal. Also, Treasury Secretary Bessent previously 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."

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 -0.87%.  The yen is climbing against the dollar today on speculation President Trump favors a weaker dollar after Bloomberg reported that the US and South Korean governments discussed currency policies earlier this month. The yen also has a positive carryover from Tuesday when the April 30-May 1 BOJ meeting summary said policymakers remain committed to raising interest rates and normalizing monetary policy.

Japan's Apr PPI eased to +4.0% y/y from +4.3% y/y in March, right on expectations.

June gold (GCM25) today is down -54.20 (-1.67%), and July silver (SIN25) is down -0.615 (-1.86%).  Precious metals today are sharply lower, with gold falling to a 5-week low.  Fund liquidation of long gold positions is weighing on prices due to the easing of US-China trade tensions after China and the US this past weekend agreed to reduce tariffs on each other's goods. Also, today's stock rally has reduced safe-haven demand for precious metals.  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.

Today's weaker dollar is bullish for precious metals.  Also, today's report from Bloomberg that said the US and South Korea talked about currency policies bolstered speculation that the Trump administration favors a weaker dollar, a bullish factor for precious metals.  In addition, an increase in inflation expectations supports gold demand as an inflation hedge after the US 10-year breakeven inflation rate rose to a 6-week high today.   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.