The dollar index (DXY00) today is up by +0.23%. The dollar is climbing today on weakness in the yen, which fell to a 2-week low against the dollar. Also, today’s better-than-expected US economic news of Dec S&P composite-20 home prices and Feb consumer confidence is supportive of the dollar.
Gains in the dollar are limited due to the strength of the yuan, which rallied to a 2.75-year high against the dollar today. Also, US trade uncertainty may spur foreign investors to dump dollar assets as President Trump’s 10% global tariffs went into effect today.
The US Dec S&P composite-20 home price index rose +0.47% m/m and +1.38% y/y, stronger than expectations of +0.30% m/m and +1.30% y/y.
The Conference Board US Feb consumer confidence index rose by +2.2 to 91.2, stronger than expectations of 87.1.
The US Feb Richmond Fed manufacturing survey of current conditions unexpectedly fell -4 to -10, weaker than expectations of an increase to -5.
Chicago Fed President Austan Goolsbee said, “I remain optimistic that there can be more rate cuts this year, but that hinges on seeing actual progress on inflation that shows we are on a path back to 2%.”
Swaps markets are discounting the odds at 3% 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 down by -0.14%. The euro is under pressure today from a stronger dollar. Also, today’s economic news showing that Eurozone Jan new car registrations fell by the most in seven months is negative for the euro. In addition, lower Eurozone government bond yields have weakened the euro’s interest rate differentials after the 10-year German bund yield fell to a 2.75-month low today at 2.696%.
Eurozone Jan new-car registrations fell -3.9% y/y to 800,000, the largest decline in seven months.
Swaps are discounting a 2% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) today is up by +0.84%. The yen tumbled to a 2-week low against the dollar today after the Mainichi newspaper reported that Japanese Prime Minister Sanae Takaichi expressed apprehension about further interest rate hikes during a meeting with BOJ Governor Kazuo Ueda. Higher T-notes today are also weighing on the yen.
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 down by -74.20 (-1.42%), and March COMEX silver (SIH26) is up +0.797 (+0.92%).
Gold and silver prices are mixed today, with gold falling from a 3-week high. Dollar strength today has spurred long liquidation in gold, while the reopening of China after the week-long Lunar New Year holidays is boosting silver on speculation that Chinese demand for industrial metals will improve.
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 on Monday.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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