The dollar index (DXY00) on Wednesday fell -0.218 (-0.23%). On Wednesday, the dollar index fell moderately as lower T-note yields weighed on the dollar. Losses in the dollar were limited after Wednesday’s U.S. housing data showed unexpected increases in U.S. Dec housing starts and building permits.
EUR/USD (^EURUSD) on Wednesday rose +0.0027 (+0.24%). EUR/USD on Wednesday posted moderate gains on strength in European government bond yields after 10-year German bund yield rose to a 2-1/2 year high of 0.022%, which benefits the euro’s interest rate differentials. Also, hawkish comments Wednesday from ECB Governing Council member and Bank of France Governor Villeroy de Galhau lifted the euro when he said, "if inflation turned out to be more persistent, have no doubt the ECB will have the resolve and the capacity to quickly adapt our monetary policy."
USD/JPY (^USDJPY) on Wednesday fell -0.35 (-0.31%). USD/JPY on Wednesday fell moderately after a -2.8% sell-off in Japan’s Nikkei Stock Index sparked some safe-haven demand for the yen. Also, lower T-note yields on Wednesday were supportive of the yen.
Wednesday’s U.S. housing data was bullish for the dollar. U.S. Dec housing starts unexpectedly rose +1.4% m/m to a 9-month high of 1.702 million, stronger than expectations of a decline to 1.650 million. Also, Dec building permits, a proxy of future construction, unexpectedly rose +9.1% m/m to an 11-month high of 1.873 million, stronger than expectations of a decline to 1.703 million.
February gold (GCG22) on Wednesday closed up +30.80 (+1.70%), and March silver (SIH22) closed up +0.739 (+3.15%). Precious metals on Wednesday rallied sharply and posted 1-3/4 month highs. A slump in the dollar Wednesday was supportive for metals. Gold also has support on increased demand as an inflation hedge after UK Dec CPI rose +5.4% y/y, the fastest pace in 29-3/4 years, and Canada Dec CPI rose +4.8% y/y, the fastest pace in more than 30 years. Silver also has support on expectations for China to boost stimulus to help its slumping property market, which could spark economic growth and demand for industrial 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. Germany reported a record 112,323 new Covid infections Wednesday, and France reported a record 464,769 new Covid infections Tuesday.
