The dollar index (DXY00) on Monday rose by +0.02%. Higher T-note yields Monday underpinned the dollar. Also, the weakness in stocks Monday booted the liquidity demand for the dollar. Strength in the euro limited the upside in the dollar.
Monday’s economic news was bearish for the dollar after the Dec NAHB housing market index unexpectedly fell -2 to a 2-1/2 year low of 31, weaker than expectations of an increase to 34.
EUR/USD (^EURUSD) on Monday rose by +0.19%. The euro Monday rose moderately after news that German Dec IFO business sentiment rose more than expected to a 4-month high. Also, hawkish comments Monday from ECB Vice President Guindos and ECB Governing Council member Kazimir pushed German bund yields higher and strengthened the euro’s interest rate differentials.
The German Dec IFO business climate index rose +2.2 to a 4-month high of 88.6, stronger than expectations of 87.5.
ECB Vice President Guindos said the ECB would continue to raise interest rates at a "similar pace" to its last 50 bp rate hike until projections show that unprecedented Eurozone price gains are headed back to the bank's 2% target.
ECB Governing Council member Kazimir said he has "no doubt" the ECB will raise interest rates at its next meeting in February and that bringing inflation under control will require not only that rates move to levels that restrict the economy, but that high interest rates will stay there "much longer."
USD/JPY (^USDJPY) on Monday rose by +0.27%. The yen Monday gave up an overnight advance and posted moderate losses on strength in T-note yields. The yen initially moved higher in overnight trade on speculation the BOJ may be closer to moving to a hawkish pivot. Kyodo news reported Saturday that Prime Minister Kishida might seek to revise a decade-old accord with the BOJ and consider adding flexibility to the central bank’s 2% inflation goal, potentially paving the way for an end to its dovish policy. However, the BOJ is expected to maintain QE and keep policy on hold when it meets on Tuesday.
February gold (GCG3) on Monday closed down -2.5 (-0.14%), and March silver (SIH23) closed down -0.129 (-0.55%). Precious metals Monday moved slightly lower. A stronger dollar Monday was bearish for metals prices. Gold prices were also weighed down Monday by higher global government bond yields. Also, hawkish ECB comments Monday that signaled higher interest rates in the future undercut metals prices. Losses in metals were limited after a slide in stocks boosted safe-haven demand for precious metals.
More Forex News from Barchart
- Weakness in Chip Stocks Weighs on Tech Stocks
- Dollar Climbs on Weak Stocks and Hawkish Fed Comments
- Stocks Fall as Central Banks Remain Hawkish
- Dollar Rallies on Safe-Haven as Stocks Plunge
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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