The dollar index (DXY00) today is down by -0.89%. The dollar is under pressure today after President Trump refrained from imposing new tariffs on Asian and European goods on his first day in office. Also, today’s decline in T-note yields weakened the dollar’s interest rate differentials and weighed on the dollar. In addition, today’s stock rally has curbed liquidity demand for the dollar.
The markets are discounting the chances at 1% for a -25 bp rate cut at the January 28-29 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.31%. Today, the euro is falling on dovish ECB comments after ECB Governing Council members Villeroy de Galhau and Kazimir said there is a chance the ECB will continue cutting interest rates this year. Also, weakness in German business sentiment undercut the euro after today’s news that the German Jan ZEW survey expectations of economic growth fell more than expected. The euro found support from today’s news that Eurozone Dec new car registrations posted their largest increase in 8 months.
The German Jan ZEW survey expectations of economic growth fell -4.4 to 10.3, weaker than expectations of 15.1.
Eurozone Dec new car registrations rose +5.1% y/y to 911,000 units, the biggest increase in 8 months.
ECB Governing Council member Villeroy de Galhau said, “There’s a plausible consensus” that the ECB will lower interest rates at each of its upcoming meetings.
ECB Governing Council member Kazimir said a reduction in interest rates by the ECB next week is all but certain, and two to three more will probably follow.
Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at its next meeting on January 30.
USD/JPY (^USDJPY) today is down by -0.08%. The yen today climbed to a 1-month high against the dollar after President Trump so far refrained from imposing new tariffs on Asian goods, which bolsters expectations for the BOJ to raise interest rates following Friday’s 2-day policy meeting. The yen also fell today after Kyodo News reported that the BOJ is likely to raise interest rates at the week’s policy meeting. In addition, today’s decline in T-note yields is bullish for the yen. Gains in the yen were limited after the 10-year JGB bond yield matched a 1-1/2 week low today of 1.178%.
February gold (GCG25) today is up +2.30 (+0.08%), and March silver (SIH25) is up +0.224 (+0.72%). Precious metals today are moving higher. Today’s weaker dollar is supportive of precious metals prices. Also, a decline in global bond yields today supported precious metals. In addition, dovish central bank comments today supported precious metals as a store of value after ECB Governing Council members Villeroy de Galhau and Kazimir said they expect the ECB to keep lowering interest rates this year. Silver prices also garnered support today after President Trump so far refrained from imposing new tariffs on Chinese goods, which supports global economic growth prospects and industrial metals demand.
Gains in gold prices are limited today by reduced safe-haven demand after President Trump refrained from imposing new tariffs on Chinese and European goods on his first day in office. Also, a decline in inflation expectations reduced demand for gold as an inflation hedge after the US 10-year breakeven inflation rate fell to a 1-1/2 week low today. In addition, today’s stock rally curbed safe-haven demand for precious metals.
