The dollar index rose to a 1-week high, up +0.25%, boosted by lower US unemployment claims and rising T-note yields. Questions about Fed independence, President Trump’s possible action, and a strong Chinese yuan are limiting gains. US weekly jobless claims fell to a 1-month low of 199,000, outperforming expectations.

Markets give a 15% chance of a -25 bp rate cut at the next FOMC meeting. Expectations for a -50 bp rate cut by the FOMC in 2026, a +25 bp rate hike by the BOJ, and unchanged rates by the ECB weigh on the dollar. Concerns about Trump appointing a dovish Fed Chair also pressure the dollar.

EUR/USD dropped to a 1-week low, down -0.21%, due to dollar strength and uncertainty surrounding the Russian-Ukrainian war. Trading activity is low due to Germany’s New Year holiday. Swaps are pricing in a 1% chance of a +25 bp rate hike by the ECB on February 5.

USD/JPY is up +0.33%, with the yen at a 1-week low against the dollar. Higher T-note yields and dollar strength are bearish for the yen. The market gives a 1% chance of a BOJ rate hike on January 23. Gold and silver prices are down today, with gold hitting a 2.5-week low amid rising margins and a strong dollar.

Bullish factors for precious metals include the FOMC’s liquidity injection and safe-haven demand from geopolitical risks. Central bank gold demand is rising, with China’s PBOC reserves increasing and global central banks purchasing more gold. Fund demand for gold and silver ETFs is also strong, hitting multi-year highs.

The article was originally published on Barchart.com.

Read more at Yahoo Finance: Dollar Gains on Positive US Labor News and Higher Bond Yields