The dollar index fell to a 1-week low due to weaker-than-expected US economic reports on Q4 employment cost index and Dec retail sales. Expectations of Fed easing and Chinese yuan strength contributed to the decline. US Q4 employment cost index rose +0.7% q/q, while Dec retail sales were unchanged m/m. Swaps markets predict a 22% chance of a -25 bp rate cut in March.

The dollar remains weak as foreign investors withdraw capital from the US amid budget deficit, fiscal profligacy, and political polarization. Swaps markets estimate a -50 bp interest rate cut by the FOMC in 2026, a +25 bp rate hike by the BOJ, and unchanged rates by the ECB. EUR/USD is down today after ECB comments on lower interest rates.

Japan’s Jan machine tool orders surged by +25.3% y/y, boosting the yen against the dollar. Prime Minister Takaichi’s comments eased fiscal concerns, leading to yen gains. The markets predict a +28% chance of a BOJ rate hike in March. Gold and silver prices fell due to strength in global equity markets and increased margin requirements.

Precious metals found support in a weaker dollar, US economic news, and Chinese regulators’ directive on US debt. Safe-haven demand, geopolitical risks, and a debasement trade drive precious metals. Central bank demand for gold has risen, and liquidity injections boost demand. Funds have strong demand, with ETF holdings at multi-year highs.

Gold and silver plummeted from record highs after Trump’s Fed Chair nomination. Warsh’s hawkish stance led to liquidation of long positions. Fund demand remains strong, with ETF holdings at highs despite recent liquidation. Rich Asplund did not have positions in mentioned securities. Information is for informational purposes only.

Read more at Yahoo Finance: Dollar Pressured by Weakness in US Economic News