The dollar index (DXY00) on Tuesday fell by -0.70%. The dollar retreated Tuesday as the yen surged to a 4-1/2 month high after the BOJ unexpectedly widened its yield-curve control program. Also, hawkish comments Tuesday from several ECB policymakers strengthened EUR/USD and undercut the dollar.
EUR/USD (^EURUSD) on Tuesday rose by +0.08%. The euro Tuesday posted modest gains on dollar weakness and hawkish comments from ECB Governing Council members Nagel, Muller, and Vasle, who all said they support a further tightening of ECB policy. EUR/USD also garnered support on Tuesday’s news that showed the Eurozone Dec consumer confidence indicator rose +1.7 to a 7-month high of -22.2.
German Nov PPI rose +28.2% y/y, weaker than expectations of +31.1% y/y and the weakest report in 9 months.
The Eurozone Dec consumer confidence indicator rose +1.7 to a 7-month high of -22.2, slightly weaker than expectations of -22.0.
ECB Governing Council member Muller said, "we've given a clear message that in the next ECB meetings, interest rates need to continue to be raised significantly and at a steady pace, meaning that we should not reduce the speed of rate hikes."
ECB Governing Council member and Bundesbank President Nagel said the ECB remains "a long way" from achieving its goal of inflation of 2% over the medium term and that last week's 50 bp rate hike from the ECB was "robust" and "won't be the last."
ECB Governing Council member Vasle said an economic slowdown expected in 2023 won't significantly lower Eurozone inflation and bring it close to the 2% target soon, and that quantitative tightening and further interest rate hikes will be needed.
USD/JPY (^USDJPY) on Tuesday plummeted by -3.86%. The yen surged Tuesday to a 4-1/2 month high against the dollar after the BOJ unexpectedly widened its upper target range on the 10-year JGB yield, a hawkish development.
The BOJ, as expected, maintained its policy balance rate at -0.10% but unexpectedly widened its 10-year yield target range to 0.50% from the previous upper limit of 0.25%.
BOJ Governor Kuroda said it is too early for the BOJ to consider an exit from easing or for a policy review, and Tuesday's measures focus on market functionality.
February gold (GCG3) on Tuesday closed up +27.7 (+1.54%), and March silver (SIH23) closed up +1.072 (+4.62%). Precious metals Tuesday rallied sharply on weakness in the dollar. However, gains in gold Tuesday were limited by hawkish comments from several ECB members. Also, higher global bond yields Tuesday were bearish for gold prices.
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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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