Dollar Succumbs to Euro Strength
As the clock ticks this morning, the dollar index (DXY00) is down by -0.11%. The greenback finds itself under siege due to the fortitude of the euro, which has ascended on the back of hawkish musings from the ECB. Adding to the dollar’s woes is the disappointing U.S. Jan new home sales report, coming in weaker than anticipated.
U.S. Jan new home sales managed a tepid +1.5% uptick to 661,000, falling short of the market’s projection of 684,000.
Dollar in the Hole
Market sentiment is pricing in a -25 bp rate cut at 3% for the upcoming March 19-20 FOMC rendezvous, with the chance dropping to 21% for the subsequent meeting on April 30-May 1.
The EUR/USD (^EURUSD) pair this morning is on an upswing by +0.23%. The euro witnessed a boost from the hawkish rhetoric by ECB bigwigs – President Lagarde and ECB Governing Council members Stournaras and Mahlouf. The trio’s stance advocating caution in interest rate adjustments propelled the euro upward.
ECB President Lagarde underscored, “We are not there yet on inflation. We need to get to 2% sustainably.”
ECB Governing Council member Stournaras echoed the need for prudence, forecasting the ECB’s first rate cut to hit shores in June.
ECB Governing Council member Mahlouf chimed in, advising against a hasty decision on interest rates, urging vigilance in monitoring the pace of wage increases.
Gold and Silver Lose Their Shine
April gold (GCJ4) greets the day with a decline of -12.80 (-0.62%), with Mar silver (SIH24) following suit at -0.427 (-1.86%). The lustrous metals are feeling the squeeze this morning, with silver slipping to a 1-week nadir. Delayed expectations of Fed rate cuts, now anticipated after June, cast a shadow on precious metals. Furthermore, the hawkish stance adopted by ECB policymakers exacerbated the downward pressure. Silver’s downturn can also be attributed to the dip in iron ore prices, reaching a 4-month low on concerns regarding Chinese demand for industrial metals. Gold remains entrenched in a bout of selling spurred by funds liquidating their long holdings, with ETF gold reserves plummeting to a 4-year low this past Friday.
However, precious metals find some solace in a subdued dollar. Furthermore, the lingering geopolitical uncertainties in the Middle East and Ukraine are fanning safe-haven demand for these commodities.
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On publishing day, Rich Asplund had no direct or indirect stakes in the securities mentioned here. The information in this article is purely for informational purposes. Check out the Barchart Disclosure Policy for more deets.
What you’ve read represents the author’s personal views, which may or may not align with Nasdaq, Inc.
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