The dollar index (DXY00) Tuesday rose by +0.51%. The dollar found support Tuesday, based on Monday night’s comments from President Trump, who said he was considering tariffs on everything from steel and copper to semiconductor chips and wanted universal tariffs at “much bigger” than 2.5%. Also, higher T-note yields on Tuesday strengthened the dollar’s interest rate differentials and supported the dollar. Tuesday’s US economic news was mixed for the dollar after Dec capital goods new orders rose more than expected, but Jan consumer confidence unexpectedly fell to a 4-month low.
US Dec capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.3% m/m.
The US Nov S&P CoreLogic composite-20 home price index rose +4.33% y/y, stronger than expectations of 4.24% y/y.
The Conference Board US Jan consumer confidence index unexpectedly fell -5.4 to a 4-month low of 104.1, weaker than expectations of 105.7.
The US Jan Richmond Fed manufacturing survey showed the current conditions rose +6 to an 8-month high of -4, stronger than expectations of no change at -10.
The markets are discounting the chances at 1% for a -25 bp rate cut at the January 28-29 FOMC meeting.
EUR/USD (^EURUSD) Tuesday fell by -0.55%. The euro was under pressure Tuesday from a stronger dollar. The euro was also weighed down by expectations that the ECB will cut interest rates by -25 bp at Thursday’s policy meeting.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.
USD/JPY (^USDJPY) Tuesday rose by +0.67%. The yen fell on Tuesday due to dollar strength and higher T-note yields. Also, Monday night’s comments from President Trump that he wants universal tariffs that are “much bigger” than 2.5% raised trade tensions and weighed on the yen. Tuesday’s Japanese economic news was mixed for the yen as Dec PPI service prices unexpectedly eased, but Dec machine tool orders were revised upward.
Japan Dec PPI services prices unexpectedly eased to +2.9% y/y from +3.0% y/y in Nov versus expectations of an increase to +3.2% y/y.
Japan Dec machine tool orders were revised upward to +12.6% y/y from the previously reported +11.2% y/y, the biggest increase in 2-1/2 years.
February gold (GCG25) Tuesday closed up +29.10 (+1.06%), and March silver (SIH25) closed up +0.468 (+1.54%). Precious metals Tuesday posted moderate gains. Precious metals rose on Monday night’s comments from President Trump, who said he is considering universal tariffs on everything from steel and copper to semiconductor chips at “much bigger” than 2.5%. The increase in tariffs could boost price pressures and increase demand for precious metals as an inflation hedge. Silver prices also garnered support from Tuesday’s global economic news that showed US Dec capital goods new orders nondefense ex-aircraft and parts rose more than expected, and Japan’s Dec machine tool orders were revised upward to a 2-1/2 year high, favorable factors for industrial metals demand.
On the bearish side for precious metals Tuesday was a stronger dollar and higher global government bond yields. Also, Tuesday’s stock recovery curbed safe-haven demand for precious metals. In addition, President Trump’s comments on increasing tariffs to “much bigger” than 2.5% could lead to a trade war that slows economic growth and demand for industrial metals, a bearish factor for silver prices.
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
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