The dollar index (DXY00) today is up by +0.11%. The dollar today is slightly higher as stock weakness has boosted some liquidity demand for the dollar. Also, higher T-note yields today are supportive of the dollar. Gains in the dollar are limited after US weekly jobless claims rose more than expected, a dovish factor for Fed policy.
US weekly initial unemployment claims rose +6,000 to a 6-week high of 223,000, showing a weaker labor market than expectations of 220,000. Also, weekly continuing claims rose +46,000 to a 3-year high of 1.899 million, showing a weaker labor market than expectations of 1.866 million.
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 -0.16%. The euro today is moderately lower. The dollar’s strength today is weighing on the euro. Also, dovish comments today from ECB Governing Council member Escriva pressured the euro when he said the ECB still has restrictive policy and needs to move toward a more neutral stance. The upside in the euro appears limited in the near-term on expectations for the ECB to cut interest rates by -25 bp at next Thursday’s policy meeting.
ECB Governing Council member Escriva said, "The ECB has a monetary policy that is somewhat restrictive, and we need to move to a more neutral stance over the next semester or so."
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 -0.07%. The yen recovered from a 1-week low today and is slightly higher on a report from Nikkei that said the BOJ will raise interest rates at Friday’s policy meeting. The yen today initially moved lower after Japan’s Nikkei Stock Index rallied to a 2-week high, which curbed safe-haven demand for the yen. Also, higher T-note yields today are bearish for the yen.
Japanese trade news was mixed for the yen. Dec exports rose +2.8% y/y, stronger than expectations of +2.4% y/y. However, Dec imports rose +1.8% y/y, weaker than expectations of +3.2% y/y.
The Nikkei reported today that the BOJ is set to vote for a rate hike during its 2-day meeting that ends Friday as inflation hovers above its 2% target and wage hikes by domestic companies spread, allowing it to further normalize monetary policy.
February gold (GCG25) today is down -20.50 (-0.74%), and March silver (SIH25) is down -0.845 (-2.69%). Precious metals today are under pressure, with silver falling to a 1-week low. Today’s stronger dollar and higher global bond yields are undercutting precious metals prices. Also, today’s report from the Nikkei that said the BOJ will raise interest rates following Friday’s policy meeting sparked long liquidation in precious metals. Silver prices are also weighed down by negative carryover from today’s slide in copper prices to a 2-week low.
Dovish central bank comments today are supportive of demand for precious metals as a store of value after ECB Governing Council member Escriva said that ECB policy is still restrictive, and interest rates need to come down to a more neutral level.
