The dollar index (DXY00) on Monday fell by -0.79%. The dollar Monday extended last Friday’s losses and dropped to a 7-month low. Expectations for the Fed to be less aggressive in tightening monetary policy undercut the dollar Monday after last Friday’s U.S. economic news showed wages climbed less than expected and service sector activity unexpectedly contracted last month. In addition, a decline in the 10-year T-note yield Monday to a 3-week low weakened the dollar’s interest rate differentials.
Optimism about China’s reopening boosted the yuan Monday to a 4-3/4 month high against the dollar.
Comments on Monday from Atlanta Fed President Bostic were dovish for Fed policy and bearish for the dollar when he said a cooler U.S. CPI report this week could put a 25 bp interest rate hike on the table for February's FOMC meeting.
Monday’s U.S. economic news was better-than-expected and supportive for the dollar after Nov consumer credit rose +$27.962 million, above expectations of +$25.0 billion.
EUR/USD (^EURUSD) on Monday rose by +0.95%. The euro on Monday added to last Friday’s advance and climbed to a 7-month high. A weaker dollar Monday was bullish for the euro. Also, hawkish comments Monday from ECB Chief Economist Lane gave EUR/USD a boost when he said price pressures in the Eurozone will remain elevated even if surging energy costs start to ease. In addition, a jump in Eurozone Jan Sentix investor confidence to a 7-month high was bullish for the euro.
ECB Chief Economist Lane said that price pressures in the Eurozone will remain elevated even if surging energy costs start to ease and that the original energy shock resulting from Russia's war in Ukraine and pandemic reopening effects will feed into wages "for the next two or three years."
The Eurozone Jan Sentix investor confidence index rose +3.5 to a 7-month high of -17.5, slightly stronger than expectations of -18.0.
German Nov industrial production rose +0.2% m/m, slightly weaker than expectations of +0.3% m/m.
USD/JPY (^USDJPY) on Monday fell by -0.27%. A weaker dollar Monday sparked short-covering in the yen. Also, lower T-note yields Monday supported the yen. Trading activity in the yen Monday was subdued, with Japanese markets closed for the Coming of Age Day holiday.
February gold (GCG3) on Monday closed up +8.10 (+0.43%), and March silver (SIH23) closed down -0.111 (-0.46%). Precious metals Monday settled mixed, with gold climbing to an 8-month high. A slump in the dollar index Monday to a 7-month low was bullish for metals prices. Also, a decline in T-note yields Monday was bullish for gold prices. A smaller-than-expected increase in Monday’s German Nov industrial production report was bearish for silver prices.
More Precious Metal News from Barchart
- Global Stocks Rally on China Optimism and Hopes for Less-Aggressive Fed
- Dollar Falls Along With Bond Yields
- Stocks Rally as Bond Yields Plunge on U.S. Reports
- Dollar Rallies on Strong U.S. Labor Market Reports
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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