The dollar index is up today by +0.09% due to the end of the US government shutdown and stock market weakness, boosting liquidity demand. Yen weakness supports the dollar after hitting a 1.5-week low. The dollar also gained from the stronger-than-expected Jan ISM services index.
Gains in the dollar were limited after the Jan ADP report showed a lower-than-expected increase in jobs last month, impacting Fed policy. The dollar still carries support from President Trump’s nomination of Kevin Warsh as the next Fed Chair, who is seen as more hawkish.
The US Jan ADP employment change rose by +22,000, weaker than expected. The US Jan ISM services index remained unchanged at 53.8, stronger than expected, with the prices paid sub-index rising by +1.5 to 66.6.
The dollar dropped to a 4-year low after President Trump’s comments on the dollar’s weakness. The dollar continues to face pressure as foreign investors withdraw capital due to a growing budget deficit, fiscal profligacy, and political polarization. The markets are predicting a 10% chance of a -25 bp rate cut at the next policy meeting.
EUR/USD is down by -0.01% as the euro weakens following revisions to the Eurozone Jan core CPI and Jan composite PMI, impacting ECB policy. Swaps are indicating a 1% chance of a +25 bp rate hike by the ECB at the upcoming policy meeting.
USD/JPY is up by +0.53% as the yen slides to a 1.5-week low against the dollar. Pressure on the yen is expected to increase due to an anticipated win by Prime Minister Takaichi’s Liberal Democratic Party, which could lead to larger deficits. The Japan Jan S&P services PMI was revised upward.
April COMEX gold and March COMEX silver prices are up today as tensions in the Middle East increase safe-haven demand for precious metals. Precious metals are also supported by uncertainty over US tariffs and geopolitical risks, as well as the debasement of the dollar. Strong central bank demand and fund demand are also contributing to the surge in precious metal prices.
Read more at Yahoo Finance: Dollar Gains as US Government Shutdown Ends and Stocks Weaken