The dollar index (DXY00) is down -0.09% today due to the Chinese yuan’s strength. Richmond Fed President Tom Barkin’s hawkish comments on the US economy have limited dollar losses. The dollar still sees support from President Trump’s nomination of Kevin Warsh as the next Fed Chair, seen as more hawkish.
The partial US government shutdown, now in its fourth day, negatively impacts the dollar, but a brief shutdown is expected. President Trump reached a tentative deal with Senate Democrats to fund the Homeland Security Department for two weeks, avoiding a shutdown. The dollar hit a 4-year low last Tuesday after Trump’s comments on its weakness.
Market odds discount a 9% chance of a -25 bp rate cut at the next policy meeting. The FOMC is expected to cut rates by -50 bp in 2026, while the BOJ may raise rates by +25 bp and the ECB is expected to keep rates unchanged in 2026. Swaps show a 1% chance of a +25 bp ECB rate hike.
EUR/USD (^EURUSD) is up +0.09% today amid a weak dollar. The euro’s gains are limited after French Jan CPI came in weaker than expected, influencing ECB policy. French Jan CPI (EU harmonized) fell -0.4% m/m and rose +0.4% y/y, missing expectations of -0.2% m/m and +0.6% y/y. Swaps show a 1% chance of a +25 bp ECB rate hike.
USD/JPY (^USDJPY) is up +0.12% today, falling to a 1-week low against the dollar. A Kyodo News poll suggests Japan’s ruling party may win a majority in an upcoming election, raising fiscal concerns. The markets discount a 0% chance of a BOJ rate hike at the next meeting on March 19.
Precious metals prices are soaring today, with gold up +6.24% and silver up +13.64%. The weaker dollar supports metals, driven by safe-haven demand amid geopolitical risks. Demand for metals as a store of value is rising amidst US political uncertainty and large deficits.
Increased liquidity in the financial system is boosting demand for precious metals. The FOMC’s $40 billion-per-month liquidity injection and President Trump’s nomination of Kevin Warsh as Fed Chair have influenced prices. Strong central bank demand, including China’s PBOC boosting gold reserves and global central banks purchasing gold, support prices.
Fund demand for precious metals remains strong, with long holdings in gold ETFs at a 3.5-year high. Silver ETF long holdings, though at a 2.5-month low after a rise to a 3.5-year high, indicate ongoing interest in precious metals. Central bank demand and fund holdings contribute to the metals market’s strength.
Read more at Yahoo Finance: Dollar Slips and Precious Metals Surge