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The dollar index (DXY00) today is down by -0.25%. The dollar is under pressure today on concern that foreign investors may shy away from dollar assets after President Trump late last Friday signed an executive order raising global tariffs under Section 122 of the Trade Act of 1974 to 15% from 10% that he initially imposed after the Supreme Court struck down his global “reciprocal” tariffs. Losses in the dollar are limited after the Jan Chicago Fed National Activity Index rose more than expected to a 9-month high.
The US Jan Chicago Fed National Activity Index rose +0.39 to a 9-month high of 0.18, stronger than expectations of 0.01.
US Dec factory orders fell -0.7% m/m, right on expectations.
Fed Governor Christopher Waller said his decision on whether to support an interest rate cut at the March FOMC meeting will hinge on labor market data for February.
Swaps markets are discounting the odds at 5% for a -25 bp rate cut at the next policy meeting on March 17-18.
The dollar continues to see underlying weakness as the FOMC is expected to cut interest rates by about -50 bp in 2026, while the BOJ is expected to raise rates by another +25 bp in 2026, and the ECB is expected to leave rates unchanged in 2026.
EUR/USD (^EURUSD) today is up by +0.18%. The euro is moving higher today amid dollar weakness. Also, today’s report that showed the German Feb IFO business climate survey rose more than expected to a 6-month high is bullish for the euro.
The German Feb IFO business climate survey rose +1.0 to a 6-month high of 88.6, stronger than expectations of 88.3.
Swaps are discounting a 1% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) today is down by -0.42%. The yen is moving higher today amid weakness in the dollar. Also, lower T-note yields today are supportive of the yen. Trading activity in the yen is below average today, with markets closed in Japan for the Emperor’s birthday holiday.
The markets are discounting a +12% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) today is up by +132.10 (+2.60%), and March COMEX silver (SIH26) is up +4.612 (+5.60%).
Gold and silver prices are sharply higher today, with gold posting a 3-week high and silver posting a 2-week high. Dollar weakness today is bullish for metals prices. Also, President Trump’s late last Friday action to sign an executive order raising global tariffs to 15% from 10% he initially imposed after the Supreme Court struck down his global “reciprocal” tariffs is boosting demand for precious metals as an alternative to dollar assets. In addition, heightened geopolitical risks in the Middle East are boosting demand for precious metals as a safe haven. Concerns about a possible conflict between the US and Iran are mounting after President Trump said last Friday that 10 to 15 days were “pretty much” all he would allow for talks on a nuclear deal with Iran.
Precious metals also have support amid uncertainty over US tariffs and geopolitical risks in Iran, Ukraine, the Middle East, and Venezuela. In addition, US political uncertainty, large US deficits, and uncertainty regarding government policies are prompting investors to cut holdings of dollar assets and shift into precious metals.
Strong central bank demand for gold is also supportive of prices, following the recent news that bullion held in China’s PBOC reserves rose by +40,000 ounces to 74.19 million troy ounces in January, the fifteenth consecutive month the PBOC has boosted its gold reserves.
Finally, increased liquidity in the financial system is boosting demand for precious metals as a store of value, following the FOMC’s December 10 announcement of a $40 billion-per-month liquidity injection into the US financial system.
Gold and silver plunged from record highs on January 30 when President Trump announced he had nominated Keven Warsh as the new Fed Chair, which fueled massive liquidation of long positions in precious metals. Mr. Warsh is one of the more hawkish candidates for Fed Chair and is seen as less supportive of deep interest rate cuts. Also, recent volatility in precious metals prices has prompted trading exchanges worldwide to raise margin requirements for gold and silver, leading to the liquidation of long positions.
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high on January 28. Also, long holdings in silver ETFs rose to a 3.5-year high on December 23, though liquidation has since knocked them down to a 3.25-month low last Friday.
