The dollar index fell to a 3.5-month low, down by -0.82% on Friday. Yen strength, UK economic news, and strong consumer sentiment index all contributed to the dollar’s weakness. The US Jan S&P manufacturing PMI rose to 51.9, slightly below expectations. The University of Michigan US Jan consumer sentiment index reached a 5-month high of 56.4, higher than expected. Inflation expectations were revised lower for 1-year and 5-10 year periods.

President Trump refrained from imposing tariffs on European goods opposing his Greenland acquisition effort. Markets predict a 3% chance of a -25 bp rate cut at the next FOMC meeting. The dollar is expected to see weakness due to potential interest rate cuts by the FOMC in 2026. The dollar is under pressure from increased liquidity and speculation of a dovish Fed Chair.

EUR/USD surged to a 4-month high, boosted by the dollar’s decline. Eurozone Jan S&P manufacturing PMI rose to 49.4, surpassing expectations. Swaps show a 0% chance of a +25 bp rate hike by the ECB at the next policy meeting. USD/JPY dropped by -1.67% on Friday due to yen strength and positive Japanese manufacturing data.

Gold and silver prices rallied on Friday, with new contract highs reached. Precious metals benefitted from dollar weakness, geopolitical risks, and Fed independence concerns. Economic news showed strength in global manufacturing activity, supporting industrial metals demand. Central bank gold demand remains strong, with China’s PBOC boosting reserves and global central banks purchasing gold.

Fund demand for precious metals is high, with long holdings in gold and silver ETFs at multi-year highs. The overall outlook for precious metals remains positive due to safe-haven demand, geopolitical risks, central bank demand, and fund demand.

Read more at Yahoo Finance: Dollar Retreats and Precious Metals Surge to Record Highs