The dollar index (DXY00) today is down by -0.20% and posted a 5-week low. Today’s tumble in T-Note yields has weakened the dollar’s interest rate differentials and is weighing on the dollar. The dollar also came under pressure when President Trump on Sunday threatened to impose tariffs on Colombia after the country refused to take in deported immigrants from the US. However, the dollar recovered some of its losses after a deal was reached with Colombia to take the deported migrants. The dollar also garnered some support from strength in today’s US economic news after the Dec Chicago Fed national activity index rose more than expected to a 7-month high, and Dec new home sales rose more than expected.
The US Dec Chicago Fed national activity index rose +0.16 to a 7-month high of 0.15, stronger than expectations of -0.06.
US Dec new home sales rose +3.6% m/m to 698,000, stronger than expectations of 675,000.
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 up by +0.10% and posted a 5-week high. Today’s slumping dollar is supportive of the euro. The euro also gained after the German Jan IFO business climate rose more than expected. Further strength in the euro may be limited due to expectations for the ECB to cut interest rates by -25 bp at Thursday’s policy meeting.
The German Jan IFO business climate rose +0.4 to 85.1, stronger than expectations of 84.8.
Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at its next meeting on January 30.
USD/JPY (^USDJPY) today is down by -1.05%. The yen today rallied sharply to a 5-week high against the dollar. Today’s selloff in global equity markets has sparked safe-haven buying of the yen. Also, today’s tumble in T-note yields is bullish for the yen. The yen also gained today after the Japan Nov leading index CI was revised upward.
The Japan Nov leading index CI was revised upward by +0.5 to 107.5 from the previously reported 107.0.
February gold (GCG25) today is down -34.40 (-1.24%), and March silver (SIH25) is down -0.560 (-1.80%). Precious metals today are moderately lower. Precious metals tumbled today as the selloff in equity markets has sparked liquidation of precious metals positions to cover losses in stocks. Precious metals also fell back after President Trump threatened to impose tariffs on Colombia after the country initially said it would not take back deported migrants from the US. However, a deal between Colombia and the US was soon reached, and precious metals recovered from their worst levels. Gold prices also slid on reduced demand for gold as an inflation hedge as inflation expectations declined after the 10-year US breakeven inflation rate fell to a 2-1/2 week low today. Silver prices also came under pressure today after the China Jan manufacturing PMI unexpectedly contracted by the most in 5 months, a bearish factor for industrial metals demand.
Losses in precious metals are limited today after the dollar index tumbled to a 5-week low. Also, today’s slump in global bond yields supports precious metals. In addition, today’s stock selloff has boosted safe-haven demand for precious metals.
