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The dollar index (DXY) rose by 0.48% to a 1.5-week high on Tuesday, fueled by hawkish comments from Federal Reserve officials. Kansas City Fed President Jeff Schmid highlighted the need to combat persistent inflation, while Minneapolis Fed President Neel Kashkari warned that significant interest rate cuts could exacerbate inflation risks. The ongoing U.S. government shutdown, now in its second week, poses a potential threat to economic growth and the dollar as well.
In Europe, the euro (EUR/USD) fell by 0.50%, hitting a 1.5-week low, influenced by a 0.8% drop in German factory orders and political instability in France following the resignation of Prime Minister Lecornu. Meanwhile, USD/JPY advanced by 1.00%, as the yen weakened to a 7.5-month low amid concerns regarding future Bank of Japan policy shifts after Sanae Takaichi’s election as leader of Japan’s ruling Liberal Democratic Party.
Precious metals exhibited mixed performance, with December gold climbing by $28.10 (+0.71%) to a new contract high, while December silver dropped by $0.933 (-1.93%). Demand for these metals is being supported by the U.S. government shutdown and global uncertainty, despite dollar strength and hawkish Fed commentary. The People’s Bank of China has also been increasing its gold reserves, providing further support for gold prices.
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