The dollar index (DXY00) today is up by +0.29% and posted a new 2-year high. The dollar has carryover support from last Friday’s stronger-than-expected US Dec payroll report that reduced the chances of Fed rate cuts. Also, higher bond yields are strengthening the dollar’s interest rate differentials as the 10-year T-note yield today rose to a 4-month high. In addition, today’s weakness in stocks has increased liquidity demand for the dollar.
The markets are discounting the chances at 3% for a -25 bp rate cut at the January 28-29 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.42% and posted a fresh 2-year low. Dollar strength today is weighing on the euro as last Friday’s stronger-than-expected US Dec payroll report dampened the outlook for Fed interest rate cuts and is boosting the dollar. Also, dovish ECB comments today undercut the euro after ECB Governing Council member Rehn said more ECB interest rate cuts are needed.
ECB Governing Council member Rehn said, “Against the backdrop of disinflation being on track and the growth outlook having weakened, it makes sense for the ECB to continue rate cuts.”
Swaps are discounting the chances at 93% for a -25 bp rate cut by the ECB at its next meeting on January 30.
USD/JPY (^USDJPY) today is down by -0.23%. Today’s slump in global equity markets has boosted safe-haven demand for the yen. Higher T-note yields today are limiting the upside in the yen. Trading activity in the yen today is well below normal with markets in Japan closed for the Coming-of-Age holiday.
February gold (GCG25) today is down -25.00 (-0.92%), and March silver (SIH25) is down -0.819 (-2.62%). Precious metals are under pressure today due to a stronger dollar, as the dollar index rallied to a 2-year high. Higher global bond yields today are also bearish for precious metals. In addition, precious metals have had negative carryover from last Friday’s stronger-than-expected US Dec payroll report, which reduced the chances of additional Fed interest rate cuts.
Gold prices have some support today, as dovish central bank comments boosted demand for gold as an inflation hedge after ECB Governing Council member Rehn said additional ECB interest rate cuts are needed. Also, today’s stock slump has boosted some safe-haven demand for precious metals. In addition, precious metals have continued safe-haven support from geopolitical risks after the recent collapse of the Syrian government, Middle East tensions, and the escalation of hostilities in the Ukraine-Russia conflict. Silver prices garnered support today on better-than-expected Chinese trade news as China Dec exports rose +10.7% y/y, stronger than expectations of +7.5% y/y and a bullish factor for industrial metals demand.
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. More news from Barchart- Precious Metals in Q4 and 2024- Where are they Heading in 2025?
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