The dollar index (DXY00) on Wednesday fell -0.413 (-0.43%). Strength in stocks Wednesday reduced the liquidity demand for the dollar. Also, lower T-note yields Wednesday undercut the dollar. Finally, strength in EUR/USD on Wednesday weighed on the dollar as a jump in European government bond yields was bullish for the euro.
EUR/USD (^EURUSD) on Wednesday rose +0.0048 (+0.43%). Signs of inflation pressures in Europe lifted the 10-year German bund yield to a 3-1/2 week high Wednesday of -0.269% and supported the euro. The French Nov PPI rose +17.4% y/y, the largest increase since the data series began in 1996. Hawkish ECB comments on Wednesday also supported EUR/USD after ECB Governing Council member Rehn said the ECB "will respond" if inflation climbs too high.
USD/JPY (^USDJPY) on Wednesday rose +0.05 (+0.04%). USD/JPY climbed to a 3-1/2 week high Wednesday as safe-haven demand for the yen was curbed after Japan’s Nikkei Stock Index closed higher by +0.16%. The yen also came under pressure Wednesday after the minutes of the October BOJ meeting said a weaker yen has positively impacted the economy as a whole.
U.S. economic data on Wednesday was mixed for the dollar. On the bearish side, the Nov Chicago Fed national activity index fell -0.38 to 0.37, weaker than expectations of 0.50. Also, Nov existing home sales rose +1.9% m/m to 6.46 million, weaker than expectations of 6.53 million. On the positive side, U.S. Q3 GDP was unexpectedly revised upward to 2.3% (q/q annualized) from 2.1%, and the Conference Board’s Dec U.S. consumer confidence index rose +3.9 to a 5-month high of 115.8, stronger than expectations of 111.0.
February gold (GCG22) on Wednesday closed up +13.50 (+0.75%), and March silver (SIH22) closed up +0.290 (+1.29%). Precious metals on Wednesday settled moderately higher, with silver posting a 3-week high. Dollar weakness on Wednesday was bullish for precious metals. Gold prices also gained on lower T-note yields. Silver prices garnered support Wednesday after U.S. Q3 GDP was revised higher, a sign of stronger industrial metals demand.
The dollar and gold have continued safe-haven support from the negative impact of the worldwide spread of the delta and omicron Covid variants on the global economic recovery. The 7-day average of new U.S. Covid infections rose to a 3-month high of 148,502 on Tuesday, and the UK reported a record 106,122 new Covid infections on Wednesday.
