The dollar index (DXY00) today is up +0.18%. The dollar recovered from overnight losses and turned higher after weekly US jobless claims rose less than expected, a sign of labor market strength. The dollar extended its gains after a stock market slump boosted liquidity demand for the currency. The dollar initially moved lower today amid a stronger yuan, which rallied to a 2.75-year high.
US weekly initial unemployment claims rose by +4,000 to 212,000, showing a stronger labor market than expectations of 216,000.
Swaps markets are discounting the odds at 2% 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 -0.16%. The euro is under pressure today from a stronger dollar. The euro also slipped after the Eurozone Feb economic confidence indicator unexpectedly declined. In addition, the Eurozone Jan M3 money supply rose by more than expected, the most in 6 months, a negative factor for the euro.
The Eurozone Feb economic confidence indicator unexpectedly fell -1.0 to 98.3, weaker than expectations of an increase to 99.8.
Eurozone Jan M3 money supply rose +3.3% y/y, stronger than expectations of +2.9% y/y and the largest increase in 6 months.
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 -0.27%. The yen is moving higher today on hawkish comments from BOJ Board member Hajime Takata, who signaled his support for additional BOJ interest rate increases. Also, today's upward revision to the Dec leading index CI to a 19-month high is bullish for the yen. Gains in the yen are limited after today's rally in the Nikkei Stock Index to a new record high, diminishing safe-haven demand for the yen.
The Japan Dec leading index CI was revised upward by +0.8 to a 19-month high of 111.0 from the previously reported 110.2.
BOJ Board member Hajime Takata is pushing for additional BOJ interest rate increases, describing Japan's inflation trend as "heated to the core."
The markets are discounting a +10% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) today is down by -60.90 (-1.17%), and March COMEX silver (SIH26) is down -5.308 (-5.83%).
Gold and silver prices are retreating today. Signs of easing US-Iranian tensions are curbing safe-haven demand for precious metals today, after the foreign minister of Oman, who is mediating the nuclear discussions between the US and Iran, said "creative and positive ideas" were exchanged, that the discussions have been positive so far, and that they will continue later today. Also, comments today from BOJ Board member Hajime Takata sparked long liquidation in precious metals when he said he favors additional interest rate increases from the BOJ.
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 Wenesday. 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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