\n<\/p>\n
The dollar index (DXY00) fell from a 4-week high on Friday and finished down by -0.13%. \u00a0Weaker-than-expected US economic news knocked the dollar lower on Friday.\u00a0 US Q4 GDP, the Feb S&P manufacturing PMI, and the University of Michigan US Feb consumer sentiment index all were weaker than expected and weighed on the dollar.<\/p>\n
The dollar fell to its low on Friday after the Supreme Court struck down President Trump\u2019s global tariffs, as the removal of the tariff revenue will boost the US budget deficit.\u00a0Losses in the dollar are limited after the Dec core PCE price index, the Fed\u2019s preferred inflation gauge, rose more than expected, a hawkish factor for Fed policy.\u00a0 Also, hawkish comments on Friday from Atlanta Fed President Raphael Bostic supported the dollar, as he said it\u2019s prudent to keep interest rates mildly restrictive.<\/p>\n
US Q4 GDP rose +1.4% (q\/q annualized), weaker than expectations of +2.8%.\u00a0 The Q4 core PCE price index rose +2.7%, stronger than expectations of +2.6%.<\/p>\n
US Dec personal spending rose +0.4% m\/m, stronger than expectations of +0.3% m\/m.\u00a0 Dec personal income rose +0.3% m\/m, right on expectations.<\/p>\n
The US Dec core PCE price index (the Fed\u2019s preferred inflation gauge) rose +0.4% m\/m and +3.0% y\/y, stronger than expectations of +0.3% m\/m and +2.9% y\/y.<\/p>\n
The US Feb S&P manufacturing PMI fell -1.2 to 51.2, weaker than expectations of no change at 52.4.<\/p>\n
US Dec new home sales fell by -1.7% to 645,000, better than expectations of 730,000.<\/p>\n
The University of Michigan US Feb consumer sentiment index was revised lower by -0.7 to 56.6, weaker than expectations of no change at 57.3.<\/p>\n
The University of Michigan US Feb 1-year inflation expectations were revised lower to a 13-month low of 3.4% from the previously reported 3.5%.\u00a0 The Feb 5-10 year inflation expectations were revised lower to 3.3% from the previously reported 3.4%.<\/p>\n
Atlanta Fed President Raphael Bostic said it\u2019s prudent to have interest rates mildly restrictive as he expects US growth in 2026 to put upward pressure on inflation.<\/p>\n
The US Supreme Court struck down President Trump\u2019s sweeping global tariffs, saying he exceeded his authority by invoking a federal-emergency powers law to impose his \u201creciprocal\u201d tariffs as well as targeted import taxes on countries to address fentanyl trafficking.<\/p>\n<\/p><\/div>\n
After the Supreme Court\u2019s ruling, President Trump said he would impose a 10% global tariff under Section 122 of the Trade Act of 1974, over and above tariffs already being charged.\u00a0 He declared all national security tariffs under Section 232 and existing Section 301 tariffs to be in full force and effect.\u00a0 Section 122 tariffs last only 150 days, and Congress would need to approve any extension.\u00a0 Section 301 tariffs require country-specific investigations that include hearings and an opportunity for input from companies or nations affected.<\/p>\n
Swaps markets are discounting the odds at 5% for a -25 bp rate cut at\u00a0the next policy meeting on March 17-18.<\/p>\n
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.<\/p>\n
EUR\/USD (^EURUSD) on Friday rose by +0.06%. \u00a0The euro posted modest gains on Friday amid the dollar\u2019s weakness.\u00a0 Also, Friday\u2019s stronger-than-expected Eurozone Feb manufacturing PMI was supportive of the euro.\u00a0 Gains in the euro were limited after German Jan producer prices fell more than expected, a dovish factor for ECB policy.<\/p>\n
Eurozone Feb S&P manufacturing PMI rose +1.3 to 50.8, stronger than expectations of 50.0 and the fastest pace of expansion in 3.5 years.<\/p>\n
German Jan PPI fell -3.0% y\/y, weaker than expectations of -2.2% y\/y and the steepest pace of decline in 1.75 years.<\/p>\n
Swaps are discounting a 2% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.<\/p>\n
USD\/JPY (^USDJPY) on Friday rose by +0.03%.\u00a0 The yen fell to a 1.5-week low against the dollar on Friday after Japan\u2019s Jan consumer prices rose less than expected, a dovish factor for BOJ policy.\u00a0 Also, higher T-note yields on Friday were bearish for the yen.<\/p>\n
Losses in the yen were limited after the dollar weakened when the US Supreme Court struck down President Trump\u2019s global tariffs.\u00a0 The yen also found support Friday after Japan\u2019s Feb S&P manufacturing PMI rose at the strongest pace in three years.\u00a0 Divergent central bank policies are also supportive of the yen, with the BOJ seen raising interest rates in the near term, while the Fed and ECB keep their rates steady or cut them.<\/p>\n
Japan\u2019s Jan national CPI rose +1.5% y\/y, weaker than expectations of +1.6% y\/y and the smallest pace of increase in 3.75 years.\u00a0 Jan national CPI ex-fresh food and energy rose +2.6% y\/y, weaker than expectations of +2.7% y\/y and the smallest pace of increase in 11 months.<\/p>\n
The Japan Feb S&P manufacturing PMI rose +1.3 to 52.8, the strongest pace of expansion in three years.<\/p>\n
The markets are discounting a +12% chance of a BOJ rate hike at the next meeting on March 19.<\/p>\n
April COMEX gold (GCJ26) on Friday closed up by +83.50 (+1.67%), and March COMEX silver (SIH26) closed up +4.709 (+6.07%).<\/p>\n
Gold and silver prices rallied sharply on Friday, posting 1-week highs.\u00a0 Heightened geopolitical risks in the Middle East are boosting demand for precious metals as a safe haven.\u00a0 Concerns about a possible conflict between the US and Iran are mounting after President Trump said 10 to 15 days were \u201cpretty much\u201d all he would allow for talks on a nuclear deal with Iran.\u00a0 Gains in precious metals accelerated on Friday after the Supreme Court struck down President Trump\u2019s global tariffs, as the removal of the tariff revenue will boost the US budget deficit, increasing demand for precious metals as a store of value.<\/p>\n
Precious metals also have support amid uncertainty over US tariffs and geopolitical risks in Iran, Ukraine, the Middle East, and Venezuela.\u00a0 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.<\/p>\n
Strong central bank demand for gold is also supportive of prices, following the recent news that bullion held in China\u2019s 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.<\/p>\n
Finally, increased liquidity in the financial system is boosting demand for precious metals as a store of value, following the FOMC\u2019s December 10 announcement of a $40 billion-per-month liquidity injection into the US financial system.<\/p>\n
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.\u00a0 Mr. Warsh is one of the more hawkish candidates for Fed Chair and is seen as less supportive of deep interest rate cuts.\u00a0 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.<\/p>\n
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high on January 28.\u00a0 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 on February 2.<\/p>\n
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. This article was originally\u00a0published on Barchart.com <\/i><\/p>\n<\/p><\/div>\n