The dollar index (DXY00) on Monday rose by +0.68%. The dollar Monday extended last Friday’s rally to a 4-week high. The dollar saw a positive carry-over from last Friday’s stronger-than-expected U.S. payroll and ISM services reports, which suggested that the Fed needs to continue raising interest rates. A jump in the 10-year T-note yield Monday to a 3-1/2 week high was also supportive of the dollar, along with Monday’s slide in stocks, which has boosted liquidity demand for the dollar.
EUR/USD (^EURUSD) on Monday fell by -0.64%. Strength in the dollar Monday knocked the euro down to a 4-week low. Losses in EUR/USD were limited by hawkish comments from ECB Governing Council members Vasle and Holzmann, who said they support continued ECB interest rate hikes.
Monday’s Eurozone economic reports were mixed for EUR/USD. On the negative side, Eurozone Dec retail sales fell -2.7% m/m, weaker than expectations of -2.5% m/m and the biggest decline in 20 months. Conversely, the Jan Sentix investor confidence index rose by 9.5 points to -8.0, stronger than expectations of -13.5. Also, German Dec factory orders rose +3.2% m/m, stronger than expectations of +2.0% m/m and the biggest increase in 15 months.
ECB comments Monday were hawkish for ECB policy and supportive of EUR/USD. ECB Governing Council member Vasle said ECB interest rate hikes are "far from over" despite a slowdown in inflation as core inflation remains "much too high." Also, ECB Governing Council member Holzmann said, "the risk of over-tightening of monetary policy seems dwarfed by the risk of doing too little," and the ECB must "show its teeth until it sees a credible convergence in its inflation target."
USD/JPY (^USDJPY) on Monday rose by +1.04%. The yen Monday extended last Friday’s decline down to a 1-month low against the dollar. Higher T-note yields Monday weighed on the yen. The yen also fell after the Nikkei reported Monday that the government approached BOJ Deputy Governor Amamiya to lead the BOJ when current governor Kuroda steps down in April. The appointment of Amamiya to the BOJ Governor is seen as likely to extend the BOJ’s ultra-easy monetary policy stance.
April gold (GCJ3) on Monday closed up +2.90 (+0.15%), and March silver (SIH23) closed down -0.168 (-0.75%). Precious metals Monday settled mixed, with silver falling to a 2-month low. A rally in the dollar index Monday to a 3-1/2 week high was bearish for metals prices. Also, higher global bond yields Monday were bearish for metals. Gold rebounded from a 1-month low Monday and posted modest gains on increased safe-haven demand from rising geopolitical risks between the U.S. and China after the U.S. shot down an alleged Chinese spy balloon.
More Precious Metal News from Barchart
- Stocks Lower on the Outlook for Hawkish Fed
- Dollar Soars as U.S. Economic Strength May Keep the Fed Hawkish
- Stocks Finish Lower But Up On the Week
- Dollar Gains on U.S. Labor Market Strength and a Weak Euro
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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