The dollar index (DXY00) recovered on Tuesday, up by 0.01%. Hawkish Fed comments from Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan supported the dollar. Weaker US economic reports on Q4 employment cost index and Dec retail sales initially pressured the dollar. Swaps markets are discounting a 20% chance of a -25 bp rate cut at the next Fed meeting on March 17-18.

US Q4 employment cost index rose +0.7% q/q, below expectations. Dec retail sales were unchanged m/m, weaker than expected. Cleveland Fed President Hammack emphasized patience with rate decisions. Dallas Fed President Logan stated more rate cuts would require “material” US labor market weakness. The dollar remains under pressure due to various economic factors.

EUR/USD (^EURUSD) fell on Tuesday by -0.12% due to a stronger dollar and a dovish ECB blog post. ECB Vice President Luis de Guindos stated that current interest rates in the Eurozone are appropriate. Swaps are pricing in a 3% chance of a -25 bp rate cut by the ECB at the next policy meeting on March 19.

USD/JPY (^USDJPY) fell by -1.00% as the yen rallied to a 1-week high against the dollar. Japan saw a strong increase in Jan machine tool orders, boosting the yen. Japanese Prime Minister Takaichi eased fiscal concerns by stating a proposed sales tax cut for food won’t increase debt. Markets are pricing in a +27% chance of a BOJ rate hike on March 19.

Gold and silver prices retreated on Tuesday due to hawkish Fed comments. Recent volatility prompted trading exchanges to raise margin requirements, leading to liquidation of long positions. Precious metals found support from a weaker dollar and weaker US economic data, which supports the case for easier Fed policy. Central bank demand for gold remains strong.

Increased liquidity in the financial system, safe-haven demand, and a debasement trade are boosting precious metals. President Trump’s comments on the dollar have sparked demand for metals. Fund demand for precious metals remains high, with long holdings in gold ETFs at a 3.5-year high. Long holdings in silver ETFs rose to a 3.5-year high last month.

Read more at Yahoo Finance: Dollar Recovers and Gold Falls on Hawkish Fed Comments