The dollar index (DXY00) today is down by -0.13%. The dollar is under pressure today as stocks rallied on a New York Times report that Iranian operatives made an offer to discuss terms for ending the war. The dollar recovered from its worst level today after the Feb ADP employment report showed US employers added more jobs than expected last month, and the Feb ISM services index unexpectedly expanded by the most in 3.5 years, hawkish factors for Fed policy.
The US Feb ADP employment change increased by +63,000, stronger than expectations of +50,000.
The US Feb ISM services index unexpectedly rose +2.3 to 56.1, better than expectations of a decline to 53.5 and the strongest pace of expansion in 3.5 years. The Feb ISM services prices paid sub-index unexpectedly fell -3.6 to an 11-month low of 63.0, weaker than expectations of an increase to 68.3.
Cleveland Fed President Beth Hammack said it's important to drive inflation back to target and that "Fed policy could be on hold for quite some time."
Swaps markets are discounting the odds at 2% 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 -37 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.
EUR/USD (^EURUSD) today is up by +0.16%. Weakness in the dollar today is supporting gains in the euro. Also, today's Eurozone economic reports, which showed that the Eurozone Jan PPI rose more than expected and the Jan unemployment rate unexpectedly fell to a record low, are hawkish for ECB policy and supportive of the euro.
Eurozone Jan PPI rose +0.7% m/m and fell -2.1% y/y, stronger than expectations of +0.2% m/m and -2.6% y/y.
The Eurozone Jan unemployment rate fell -0.2 to a record low of 6.1%, showing a stronger labor market than expectations of 6.2%.
Swaps are discounting a 0% 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 -0.30%. The yen is climbing against the dollar today after the Japan Feb consumer confidence index rose more than expected to a 6.75-year high. Also, today's comments from Japanese Finance Minister Satsuki Katayama boosted the yen when he said the Japanese government could act to quell excessive currency moves, including through market intervention. In addition, today's -3% plunge in the Nikkei Stock Index to a 3.5-week low sparked some safe-haven demand for the yen.
The Japan Feb consumer confidence index rose +2.1 to a 6.75-year high of 40.0, stronger than expectations of 38.2.
The markets are discounting a +5% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) today is up by +26.80 (+0.52%), and May COMEX silver (SIK26) is up +0.342 (+0.41%).
Gold and silver prices are moving higher today as they recover some of Tuesday's plunge. Today's weaker dollar is supportive of precious metals prices. Also, concerns that the Iran war could spread throughout the Middle East are boosting safe-haven demand for gold as Iran has launched drones and missiles against several countries in the region, including Qatar, Saudi Arabia, Bahrain, and Oman. In addition, fears that soaring energy costs will boost inflation has spurred buying of precious metals as an inflation hedge after Iranian drone strikes forced Qatar to shut its Ras Laffan plant, the world's largest natural gas export facility, and the closure of the Strait of Hormuz has prompted Iraq and Saudi Arabia, OPEC's largest producers, to curb crude production as their storage facilities fill up.
Precious metals fell back from their best levels today on hawkish comments from Cleveland Fed President Beth Hammack, who said: "Fed policy could be on hold for quite some time." Also, today's stronger-than-expected US economic reports on Feb ADP employment and Feb ISM services pushed T-note yields higher and weighed on precious metals.
Precious metals also have safe-haven support amid the ongoing war in Iran and geopolitical risks in Ukraine, the Middle East, and Venezuela. In addition, uncertainty over US tariffs, US political turmoil, large US deficits, and government policy uncertainty are prompting investors to cut holdings of dollar assets and shift into precious metals.
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.
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.
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high last Friday. 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 3.5-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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