The dollar index (DXY00) is up +0.09% today after the Dec ISM services index expanded at its fastest pace in 14 months. It also rose due to safe-haven demand following the US seizure of a Russian-flagged tanker for sanctions violations. The dollar initially fell after the Dec ADP employment report showed fewer jobs added than expected.

US Dec ADP employment change was +41,000, below expectations of +50,000. The Dec ISM services index unexpectedly rose to 54.4, beating expectations of a decline to 52.2. US Nov JOLTS job openings fell to a 14-month low of 7.146 million, weaker than expected. US Oct factory orders also fell.

The dollar is expected to see interest rate cuts by the FOMC in 2026, while the BOJ may raise rates. The Fed’s liquidity boost and potential appointment of a dovish Fed Chair are bearish for the dollar. EUR/USD is down due to negative economic news in the Eurozone.

Eurozone Dec CPI met expectations, but core CPI was weaker than expected. German Nov retail sales unexpectedly fell. Swaps are pricing in a low chance of an ECB rate hike in February. USD/JPY is down, supported by lower T-note yields and pressured by tensions between China and Japan.

Gold and silver prices fell from recent highs due to a stronger dollar and profit-taking. Concerns about commodity index rebalancing may also be affecting prices. Precious metals have support from safe-haven demand, Fed policy uncertainty, and increased financial system liquidity.

Central bank demand for gold remains strong, with China’s PBOC and global central banks increasing their reserves. Fund demand for precious metals is also high, with long holdings in gold and silver ETFs at multi-year highs.

Read more at Yahoo Finance: Dollar Recovers as US Service Sector Activity Expands