The dollar index (DXY00) on Wednesday fell -0.676 (-0.71%). The dollar index on Wednesday sold off to a 2-month low. Lower T-note yields Wednesday pressured the dollar after U.S. December consumer prices came in near expectations. Also, higher stocks curbed the liquidity demand for the dollar. The dollar sank further Wednesday afternoon after the Fed Beige Book said that U.S. economic optimism showed signs of cooling.
EUR/USD (^EURUSD) on Wednesday rose +0.0081 (+0.71%). EUR/USD on Wednesday rose to a 1-3/4 month high. Dollar weakness Wednesday supported EUR/USD along with signs of strength in Eurozone industrial activity. Wednesday’s data showed Eurozone Nov industrial production rose +2.3% m/m, stronger than expectations of +0.2% m/m and the biggest increase in a year.
USD/JPY (^USDJPY) on Wednesday fell -0.78 (-0.68%). USD/JPY on Wednesday dropped to a 2-week low as the yen strengthened on optimism in Japan’s economy. The BOJ on Wednesday upgraded its economic assessment on all nine Japanese regions for the first time since 2013. The BOJ also revised up its assessment of consumer spending in all nine areas for the first time since it began to issue the report in 2005. In addition, lower T-note yields on Wednesday were supportive of the yen.
U.S. Dec CPI rose +0.5% m/m and +7.0% y/y slightly stronger than expectations of +0.4% m/m and +7.0% y/y with the +7.0% y/y gain the largest annual increase in 39-1/2 years.
U.S. Dec CPI ex-food & energy rose +0.6% m/m and +5.5% y/y, stronger than expectations of +0.5% m/m and +5.4% y/y with the +5.5% y/y gain the largest annual increase in nearly 31 years.
The Fed Beige Book was bearish for the dollar as it said that in the month through Jan 3, business "optimism remained high but waned somewhat, as the share of firms expressing positive expectations for continued economic growth over the next six months narrowed."
February gold (GCG22) on Wednesday closed up +8.80 (+0.48%), and March silver (SIH22) closed up +0.395 (+1.73%). Precious metals on Wednesday posted moderate gains after the dollar index tumbled to a 2-month low. Gold prices also garnered support on increased demand as an inflation hedge after U.S. Dec CPI rose +7.0% y/y, the largest annual increase in 39-1/2 years. Finally, lower global bond yields on Wednesday are bullish for gold prices. Strength in stocks on Wednesday was negative for precious metals.
The dollar and gold have continued safe-haven support from the negative impact of the worldwide spread of the omicron Covid variant on the global economic recovery. On Monday, the U.S. reported a record 1,485,764 new Covid infections, and the 7-day average of new U.S. Covid infections rose to a record 766,734.
https://www.barchart.com/story/news/6933440/dollar-tumbles-as-in-line-us-cpi-undercuts-t-note-yields
