The euro retreated in European trading on Tuesday against a basket of global currencies, giving up its highest level in four months versus the US dollar and heading toward its first loss in four days. The move came amid active correction and profit-taking operations, alongside a rebound in the US currency ahead of the Federal Reserve’s policy meeting.

With easing inflationary pressures on policymakers at the European Central Bank, expectations for at least one interest rate cut this year have regained momentum. Markets are now awaiting further economic data from the euro area to reprice these expectations.

Price overview

Euro exchange rate today: the euro declined against the dollar by 0.1% to 1.1870, from the day’s opening level of 1.1881, after touching a high of 1.1899.

The euro ended Monday’s session up by 0.45% against the dollar, marking a third consecutive daily gain and reaching a four-month high at 1.1907, driven by negative pressure on US assets.

US dollar

The US dollar index rose by more than 0.1% on Tuesday, beginning to recover from a four-month low at 96.81 points, on track for its first gain in four sessions, reflecting a rebound in the US currency against a basket of global currencies.

Beyond bargain buying from low levels, the dollar’s recovery comes ahead of the start of the first monetary policy meeting of the Federal Reserve this year.

The meeting is widely expected to result in interest rates being left unchanged, with an emphasis on the need for more time to assess economic developments before taking any new policy steps.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said markets are likely to focus more on questions surrounding the Federal Reserve’s independence rather than interest rate expectations.

Kong added that if Powell were to choose to step down from his role as a governor after his term as Fed chair ends in May, this could reinforce the perception that he is yielding to political pressure, potentially heightening concerns over the erosion of the Fed’s independence, which would pose a risk to the dollar.

European interest rates

Recent data from Europe showed a slowdown in headline inflation during December, underscoring easing inflationary pressures on the European Central Bank.

Money markets currently price the probability of a 25-basis-point rate cut by the ECB in February at around 25%.

Traders have revised their expectations from rates remaining unchanged throughout the year to at least one 25-basis-point cut.

To reprice these expectations further, investors are awaiting additional euro area data on inflation, unemployment, and wages.

The Japanese yen retreated in Asian trading on Tuesday against a basket of major and minor currencies, giving up its highest level in two months versus the US dollar and heading toward its first loss in three days. The move came amid active correction and profit-taking operations, alongside fading concerns over potential intervention by the Bank of Japan in the foreign exchange market to support the local currency.

Following last week’s Bank of Japan meeting, markets continue to rule out a rate hike at the central bank’s upcoming March meeting, as policymakers need more time to assess the impact of the most recent monetary tightening implemented in December on economic activity and prices.

Price overview

The Japanese yen exchange rate today: the US dollar rose against the yen by 0.3% to 154.64, from the day’s opening level of 154.14, with the lowest level recorded at 154.08.

The yen ended Monday’s session up by more than 1.0% against the dollar, marking a second consecutive daily gain and posting a two-month high at 153.30 yen, driven by expectations of coordinated intervention by US and Japanese authorities.

US dollar

The US dollar index rose by more than 0.1% on Tuesday, starting to recover from a four-month low at 96.81 points, on track for its first gain in four sessions, reflecting a rebound in the US currency against a basket of global currencies.

Beyond bargain buying from low levels, the dollar’s recovery comes ahead of the start of the first monetary policy meeting of the US Federal Reserve this year.

The meeting is widely expected to result in interest rates being left unchanged, with an emphasis on the need for more time to assess economic developments before taking any new policy steps.

Bank of Japan intervention

Money market data released by the Bank of Japan indicated that the sharp rise in the yen against the dollar on Friday was unlikely to have been caused by official Japanese intervention.

A source told Reuters that the New York Federal Reserve reviewed dollar-yen exchange rates with market participants on Friday, while senior Japanese officials said on Monday that they are in close coordination with the United States regarding foreign exchange matters.

Japanese Finance Minister Satsuki Katayama declined to comment on the exchange rate review, while currency diplomat Atsuki Mimura said the government would maintain close coordination with the United States on the foreign exchange market and would take appropriate action.

Views and analysis

Dominic Bunning, head of G10 FX strategy at Nomura, said it is clear that if both Japan’s Ministry of Finance and the US Treasury are seeking to curb the rise in the dollar against the yen, this would be a very influential factor.

Moh Siong Sim, FX strategist at OCBC, said this is not the end of the story. He added that while the market has become slightly more cautious, if nothing happens after some time, there will likely be renewed attempts to test how resolute the Japanese authorities are. At that stage, actual intervention could occur to send a stronger and clearer signal.

Japanese interest rates

Market pricing for a quarter-point interest rate hike by the Bank of Japan at the March meeting remains below 20%.

To reprice these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.

Silver prices posted a fresh all-time high on Monday, surging more than 12% to around $115 per ounce.

Markets remain focused on heightened geopolitical uncertainty, following US President Donald Trump’s threat to impose 100% tariffs on Canada should it finalize a trade agreement with China. Renewed attention to Arctic security issues and Greenland has also added to investor caution. At the same time, attention is turning to the upcoming policy meeting of the US Federal Reserve, amid preparations by Trump to appoint a new Fed chair.

Silver rose 12.48% to trade at $115.08 per ounce by 12:16 a.m. US Eastern Time, while gold gained 2.22% to $5,093.35 per ounce. Platinum climbed 2.96% to $2,852.83, and palladium jumped 6.07% to $2,138.23 at the same time.

Silver (XAG/USD) extended its strong upward momentum at the start of the week, trading near $109.50 at the time of writing on Monday, up 6.90% on the day. Earlier in the session, silver touched a new record high at $110.90, supported by a macroeconomic environment characterized by elevated uncertainty, which continues to boost demand for safe-haven assets.

US concerns push investors toward precious metals

Risk aversion remains driven by growing concerns surrounding the United States, including repeated trade threats from the US administration, rising risks of budget approval disruptions, and questions over the independence of the Federal Reserve. These factors have revived fears of deterioration in both the economic and institutional frameworks, prompting investors to turn to precious metals as a hedge against economic and financial instability.

Persistent pressure on the US dollar is another key factor supporting silver prices. The dollar remains weighed down by expectations of interest rate cuts and political uncertainty in Washington, making dollar-denominated metals more attractive to non-US buyers and mechanically boosting demand.

Strong industrial fundamentals underpin the rally

Beyond its role as a safe haven, silver is also benefiting from robust industrial demand. Demand linked to the energy transition—particularly from solar power, electrification, and power grid infrastructure—continues to tighten effective supply, at a time when mine output growth remains constrained.

US monetary policy expectations also remain central. Markets believe the Federal Reserve is likely to maintain a cautious stance in the near term, while keeping the door open to monetary easing later in the year should economic slowing accelerate. This environment of lower real yields continues to support non-yielding assets such as silver.

Overall, despite silver’s sharp rise since the start of the year, the current macro backdrop—marked by political uncertainty, trade tensions, and a weaker US dollar—continues to support the case for sustained demand for silver, both as a safe-haven asset and as a strategic metal in the global economy.

Why do people invest in silver?

Silver is one of the most widely traded precious metals and has historically been used as a store of value and a medium of exchange. While it is less prominent than gold, investors turn to silver to diversify portfolios, for its intrinsic value, or as a hedge during periods of high inflation. Investment exposure to silver can be gained through physical holdings such as coins and bars, or via financial instruments such as exchange-traded funds (ETFs) that track its global price.

What factors influence silver prices?

Silver prices are driven by a broad range of factors. Geopolitical tensions or fears of a deep economic recession can push prices higher due to its safe-haven status, albeit to a lesser extent than gold. As a non-yielding asset, silver tends to benefit from lower interest rates.

Price movements are also influenced by the US dollar, since silver is priced in dollars (XAG/USD). A stronger dollar typically caps silver’s upside, while a weaker dollar supports price gains. Other factors include investment demand, mining supply—silver is more abundant than gold—and recycling rates.

How does silver interact with gold prices?

Silver prices tend to track gold, as both share safe-haven characteristics. The gold-to-silver ratio, which reflects how many ounces of silver equal the value of one ounce of gold, is often used to assess their relative valuation. Some investors view a high ratio as signaling undervaluation of silver or overvaluation of gold, while a low ratio may suggest gold is undervalued relative to silver.

How does industrial demand affect silver prices?

Silver is widely used in industry, particularly in sectors such as electronics and solar energy, due to its superior electrical conductivity—outperforming both copper and gold. Rising industrial demand tends to lift prices, while weaker demand can weigh on them. Economic developments in the US, China, and India also influence price dynamics, as major industrial sectors in the US and China rely heavily on silver, while consumer demand in India, especially for jewelry, plays a key role in shaping price levels.

Monday’s rally in silver was especially sharp, with prices having more than tripled since mid-2025, driven by a combination of investment inflows and tight physical supply. Unlike gold, around 60% of silver demand comes from industrial uses—a share that is rising rapidly.

AI data centers require large quantities of silver used in high-performance electronics, while global solar installations continue to expand, with installed capacity in 2026 expected to consume more than 120 million ounces. Electric vehicles are adding further pressure, alongside grid upgrades and energy storage projects that continue to absorb supply.

On the supply side, silver mine production has struggled to keep pace. Around 70% of global output is produced as a by-product of other metals, limiting supply responsiveness to higher prices. This imbalance has led to a notable drawdown in inventories at major vaults, reinforcing price momentum and pushing the gold-to-silver ratio toward 46:1.

Gold-to-silver ratio signals a structural shift in precious metals markets

The collapse in the gold-to-silver ratio is one of the clearest signs that the current cycle differs from previous rallies. Less than a year ago, one ounce of gold was worth more than 120 ounces of silver; today, that ratio has fallen by more than half.

Historically, such rapid compression has only occurred during periods of strong industrial expansion combined with monetary uncertainty. If current trends persist, analysts see a return to 2011 levels near 32:1 as plausible, particularly if supply constraints intensify.

For investors, this divergence highlights differing roles: gold remains the primary hedge against political and geopolitical risk, while silver—despite higher volatility—is increasingly tied to the physical infrastructure of the global energy and technology transition.

Could silver break above $125?

A move above $125 per ounce is increasingly seen as a realistic scenario as what is being described as a “silver squeeze” intensifies in 2026. Silver is currently the best-performing major asset this year, and prices near $110 are increasingly viewed as a base rather than a peak.

Unlike previous rallies driven largely by speculation, the current cycle is underpinned by a genuine supply deficit. The market has recorded supply shortfalls for eight consecutive years, while demand from AI data centers, solar infrastructure, and electrification continues to accelerate.

Supply constraints have been exacerbated by new Chinese export licensing rules introduced on January 1, sharply restricting global silver flows. This has created liquidity traps for industrial buyers, forcing manufacturers to pay elevated premiums to secure metal. At the same time, mine output remains constrained due to silver’s by-product nature, limiting the industry’s ability to respond quickly even at higher prices.

Valuation dynamics also point to further upside. During precious metals bull markets, the gold-to-silver ratio historically declines. With gold trading near $5,000 per ounce, a return to a 40:1 ratio would mathematically imply silver prices around $125. Should industrial pressure intensify and investment inflows persist, analysts increasingly view a $125–$150 range as a realistic outcome for 2026, rather than an extreme scenario.

US stock indices rose during Monday’s trading, as investors closely monitored upcoming corporate earnings releases alongside anticipation of the Federal Reserve’s policy decision.

Several major companies are set to report earnings this week, most notably Apple, Meta, and Microsoft, along with other large technology firms.

Investors are also awaiting the Federal Reserve’s policy meeting, which begins on Tuesday and concludes on Wednesday, followed by the interest rate decision.

In trading, the Dow Jones Industrial Average rose by 0.6%, or about 280 points, to 49,375 points by 18:20 GMT. The broader S&P 500 gained 0.6%, or roughly 42 points, to 6,957 points, while the Nasdaq Composite advanced 0.6%, or about 152 points, to 23,653 points.