The dollar index (DXY00) today is down by -0.10%. The dollar today gave up an early advance and turned moderately lower after the 10-year T-note yield fell to a 2-week low of 4.566%, weakening the dollar's interest rate differentials. Also, today's stock rally has curbed liquidity demand for the dollar.
The dollar today initially moved higher on better-than-expected US economic news on Dec housing starts and Dec manufacturing production. Also, today's action by the IMF to raise its 2025 US GDP forecast due to stronger demand supports the dollar. In addition, hawkish comments from Cleveland Fed President Hammack were bullish for the dollar when she said the Fed could be "very patient" on further interest rate cuts.
US Dec housing starts rose +15.8% m/m to a 10-month high of 1.499 million, stronger than expectations of 1.327 million. Also, Dec building permits, a proxy for future construction, fell -0.7% to 1.483 million, stronger than expectations of 1.460 million.
US Dec manufacturing production rose +0.6% m/m, stronger than expectations of +0.2% m/m and the largest increase in 4 months.
Cleveland Fed President Hammack said we still have an inflation problem, and the Fed can be "very patient" on further interest rate cuts.
Today, the International Monetary Fund (IMF) raised its 2025 global GDP forecast to 3.3%, up from a 3.2% forecast in October, citing stronger US demand. The IMF raised its US 2025 GDP forecast to 2.7% from an October estimate of 2.2% and cut its Eurozone 2025 GDP estimate to 1.0% from 1.2% in October.
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 up by +0.22%. The euro is climbing today on hawkish comments from ECB Governing Council member and Bundesbank President Nagel, who said, "We shouldn't be too hasty in our efforts to normalize monetary policy." Gains in the euro are contained after the IMF cut its Eurozone 2025 GDP estimate to 1.0% from an October forecast of 1.2%.
ECB Governing Council member and Bundesbank President Nagel said, "We shouldn't be too hasty in our efforts to normalize monetary policy. Inflation is currently still elevated, and service prices, in particular, continue to rise dynamically.
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 up by +0.45%. The yen today fell from a 4-week high against the dollar and is moderately lower. The yen came under pressure today on falling Japanese government bond yields that weakened the yen's interest rate differentials after the 10-year JGB bond yield fell to a 1-week low of 1.178%.
The yen today initially moved higher when the Nikkei reported that a majority of the BOJ's policy board will likely favor a rate hike at the Jan 23-24 policy meeting. Lower T-note yields today are also supportive of the yen.
February gold (GCG25) today is down -5.10 (-0.19%), and March silver (SIH25) is down -0.545 (-1.72%). Precious metals today are moderately lower. Hawkish central bank comments today are weighing on precious metals after ECB Governing Council member and Bundesbank President Nagel said, "We shouldn't be too hasty in our efforts to normalize monetary policy." Also, today's action by Israel's security cabinet to approve a ceasefire deal with Hamas eases tensions in the Middle East and reduces safe-haven demand for precious metals.
Losses in precious metals are limited today due to a weak dollar and lower global bond yields. Precious metals still have continued safe-haven support from geopolitical risks after the recent collapse of the Syrian government and the escalation of hostilities in the Ukraine-Russia conflict. Stronger than expected, US and Chinese economic news today supports industrial metals demand and silver prices after US Dec housing starts and Dec manufacturing production rose more than expected, and China Q4 GDP and Dec industrial production rose more than expected.
China's Q4 GDP rose +5.4% y/y, stronger than expectations of +5.0% y/y and the fastest pace of expansion in six quarters. Also, China Dec industrial production rose +6.2% y/y, stronger than expectations of +5.4% y/y and the biggest increase in 8 months.
