The dollar index (DXY00) on Tuesday rose by +0.17%. The dollar Tuesday recovered from early losses and posted moderate gains as higher T-note yields strengthened the dollar’s interest rate differentials. The dollar Tuesday initially moved lower on early strength in the euro and a disappointing U.S. Jan Empire manufacturing report.
Tuesday’s U.S. economic news was dovish for Fed policy and bearish for the dollar. The Jan Empire manufacturing survey general business conditions index unexpectedly fell -21.7 to a 2-1/2 year low of -32.9, weaker than expectations of an increase to -8.6.
EUR/USD (^EURUSD) on Tuesday fell by -0.30%. The euro Tuesday erased an early rally and moved moderately lower after a Bloomberg report said that ECB policymakers might consider a slower pace of interest rate hikes than ECB President Lagarde indicated last month. EUR/USD Tuesday initially moved higher on better-than-expected economic news after the German Jan ZEW expectations of economic growth index rose more than expected to an 11-month high. Also, hawkish comments Tuesday from ECB Chief Economist Lane and ECB Governing Council member Centeno were bullish for EUR/USD.
Tuesday’s economic news was supportive for EUR/USD after the German Jan ZEW expectations of economic growth index rose +40.2 to an 11-month high of 16.9, stronger than expectations of -15.0.
Hawkish ECB comments Tuesday were supportive of the euro. ECB Chief Economist Lane said the ECB would have to "raise interest more into restrictive territory" to bring inflation back to target. Also, ECB Governing Council member Centeno said the Eurozone economy is performing better than expected in the face of record inflation and the energy crisis that erupted after Russia attacked Ukraine.
USD/JPY (^USDJPY) on Tuesday fell by -0.20%. Short covering Tuesday supported moderate gains in the yen ahead of Wednesday’s BOJ meeting results. Although expectations are for no change to the BOJ’s ultra-easy monetary policy, the markets will be on guard for any tweaks in policy, such as a widening of the 10-year JGB yield target range. The 10-year JGB bond yield is currently trading at 0.524%, above the BOJ’s upper limit of 0.50%. Higher T-note yields Tuesday limited gains in the yen.
Tuesday’s Japanese economic news was bearish for the yen after the Japan Nov tertiary index unexpectedly fell -0.2% m/m, weaker than expectations of +0.1% m/m and the biggest decline in 4 months.
February gold (GCG3) on Tuesday closed down -11.80 (-0.61%), and March silver (SIH23) closed down -0.304 (-1.25%). Precious metals Tuesday gave up early gains and closed moderately lower. A stronger dollar Tuesday weighed on metals prices. Also, higher T-note yields Tuesday were bearish for metals. In addition, hawkish ECB comments Tuesday that called for additional ECB rate hikes weighed on gold prices. Metals prices Tuesday initially moved higher after a slide in stocks boosted the safe-haven demand for precious metals.
More Forex News from Barchart
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- Stocks Fluctuate as We Head Into a 3-Day Weekend
- Dollar Drops on Slower U.S. Inflation and a Rally in Stocks
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. For more information please view the Barchart Disclosure Policy here.
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