The dollar index (DXY00) recovered from a 1.5-week low today and is up by +0.16%. The dollar is rallying on today's better-than-expected US Jan payroll report, which pushed T-note yields higher and dampened speculation of additional Fed interest rate cuts. The chance of a Fed rate cut at next month's FOMC meeting fell to 6% from 23% before the release of today's monthly payroll report.  Hawkish comments today from Kansas City Fed President Jeff Schmid also supported the dollar when he said the Fed should hold rates at a "somewhat restrictive" level.
US MBA mortgage applications fell -0.3% in the week ended February 6, with the purchase mortgage sub-index down -2.4% and the refinancing mortgage sub-index up +1.2%. The average 30-year fixed mortgage rate was unchanged from the prior week at 6.21%.
US Jan nonfarm payrolls rose +130,000, stronger than expectations of +65,000 and the most in 13 months. The Jan unemployment rate unexpectedly fell -0.1 to 4.3%, showing a stronger labor market than expectations of no change at 4.4%.
US Jan average hourly earnings rose +3.7% y/y, right on expectations.
The annual benchmark revision to 2025 US payrolls subtracted -862,000 jobs, a larger revision than the -825,000 expected.
Kansas City Fed President Jeff Schmid said, "In my view, further rate cuts risk allowing high inflation to persist even longer," so the Fed should hold rates at a "somewhat restrictive" level.
The dollar sank to a 4-year low late last month when President Trump said he's comfortable with the recent weakness in the dollar. Also, the dollar remains under pressure as foreign investors pull capital from the US amid a growing budget deficit, fiscal profligacy, and widening political polarization.Â
Swaps markets are discounting the odds at 6% for a -25 bp rate cut at the next policy meeting on March 17-18.
The dollar continues to see underlying weakness as the FOMC is expected to cut interest rates by about -50 bp in 2026, while the BOJ is expected to raise rates by another +25 bp in 2026, and the ECB is expected to leave rates unchanged in 2026.Â
EUR/USD (^EURUSD) today is down by -0.28%. Â The euro is sliding today after the dollar rallied on the stronger-than-expected US Jan payroll report and hawkish Fed comments.Â
Swaps are discounting a 2% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) today is down by -0.69%. The yen climbed to a 1.5-week high against the dollar today on carryover support from Tuesday, when Japanese Prime Minister Takaichi eased fiscal concerns after saying any tax cut on food sales would not require an increase in debt issuance. The yen fell back from its best level after T-note yields jumped on the stronger-than-expected US Jan payroll report.  Trading activity in the yen may be below average, as markets in Japan are closed today for the National Foundation Day holiday.
The markets are discounting a +26% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) today is up by +59.50 (+1.18%), and March COMEX silver (SIH26) is up by +3.046 (+3.80%).Â
Gold and silver prices are sharply higher today, with gold climbing to a 1.5-week high.  Precious metals have carryover support from Monday when Bloomberg reported that Chinese regulators told financial institutions to scale back their holdings of US debt, reviving worries that foreign investors may be diverting their dollar assets into precious metals.  Shrinking silver supplies in China are also supporting prices as silver stockpiles at warehouses linked to the Shanghai Futures Exchange fell to a 10-year low on Monday.
Precious metals are supported by safe-haven demand amid uncertainty over US tariffs and geopolitical risks in Iran, Ukraine, the Middle East, and Venezuela. Also, precious metals are surging as the dollar debasement trade gathers steam. Late last month, President Trump said that he's comfortable with the recent weakness in the dollar, which sparked demand for metals as a store of value. In addition, US political uncertainty, large US deficits, and uncertainty regarding government policies are prompting investors to cut holdings of dollar assets and shift into precious metals.Â
Strong central bank demand for gold is also supportive of prices, following the recent news that bullion held in China's PBOC reserves rose by +40,000 ounces to 74.19 million troy ounces in January, the fifteenth consecutive month the PBOC has boosted its gold reserves.Â
Finally, increased liquidity in the financial system is boosting demand for precious metals as a store of value, following the FOMC's December 10 announcement of a $40 billion-per-month liquidity injection into the US financial system.
Gold and silver plunged from record highs on January 30 when President Trump announced he had nominated Keven Warsh as the new Fed Chair, which fueled massive liquidation of long positions in precious metals. Mr. Warsh is one of the more hawkish candidates for Fed Chair and is seen as less supportive of deep interest rate cuts. Also, recent volatility in precious metals prices has prompted trading exchanges worldwide to raise margin requirements for gold and silver, leading to the liquidation of long positions.Â
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high on January 28. Also, long holdings in silver ETFs rose to a 3.5-year high on December 23, though liquidation has since knocked them down to a 2.5-month low last Monday.
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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