The US dollar fell in European trade on Tuesday against a basket of major rivals, resuming losses near two-month lows as US 10-year treasury yields tumbled.
Recent US services data triggered concerns of a slowdown in the first quarter of the year, which renewed hopes for a Fed rate cut in the first half of 2025.
The Index
The dollar index fell 0.15% to 106.56, with a session-high at 106.79.
On Monday, the index rose 0.1%, moving away from a two-month trough at 106.13.
US Yields
US 10-year treasury yields fell 1.3% on Tuesday, expanding losses for the fifth straight session and plumbing an 11-week low at 4.337%, underpinning non-yielding assets.
It comes after a surprise contraction in the US services sector in February, in a sign that confirmed the slowdown in US economic growth in the first quarter.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at just 4.5%.
Now investors await crucial US GDP growth and personal spending data this week, in addition to remarks by several Fed officials on the battle with inflation to gather more clues.
Gold prices lost ground in European trade on Tuesday away from recent record highs scaled on Monday amid profit-taking.
The losses are curbed by a drop in US 10-year treasury yields as investors await more clues on the path ahead for US interest rates in the first half of the year.
Prices
Gold prices fell 0.8% today to $2929 an ounce, with a session-high at $2953.
On Monday, gold rose 0.6%, hitting a record high at $2956 on haven demand.
US Yields
US 10-year treasury yields fell 1.3% on Tuesday, expanding losses for the fifth straight session and plumbing an 11-week low at 4.337%, underpinning non-yielding assets.
It comes after a surprise contraction in the US services sector in February, in a sign that confirmed the slowdown in US economic growth in the first quarter.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at just 4.5%.
Now investors await crucial US GDP growth and personal spending data this week, in addition to remarks by several Fed officials on the battle with inflation to gather more clues.
SPDR
Gold holdings at the SPDR Gold Trust rose 3.15 tons on Monday to a total of 907.53 tons, the highest since August 2023.
Sterling rose in European trade on Tuesday against a basket of major rivals, resuming gains against the dollar after a two-day hiatus and approaching a two-month high once more.
Recent UK consumer prices data increased inflationary pressures on the Bank of England policymakers, and reduced the odds of a March UK interest rate cut.
Prices
The GBP/USD pair rose 0.1% to $1.2639, with a session-low at $1.2616.
Sterling fell 0.1% on Monday, marking the second loss in a row on profit-taking away from a two-month high at $1.2691.
UK Rates
Recent data showed UK wages marked the fastest growth rate in 13 months in December, while main and core consumer prices rose past estimates in January.
They are yet more evidence of the increasing inflationary pressures on the Bank of England policymakers, which reduced the odds of a March 0.25% rate cut from 75% to 60%.
The UK interest rate futures now estimate a total of 54 basis points of UK rate cuts this year, down from 65 basis points in previous forecasts.
Investors now await data and more remarks from BOE officials to gather more clues.
Interest Rates
Following the Bank of England’s policy meeting this month, the interest rate gap with the US completely vanished, with GBP/USD movements now relying on upcoming clues about future monetary policy decisions in both Britain and the US.
The yen rose in Asian trade on Tuesday against a basket of major rivals, resuming gains against the US dollar and approaching a 12-week high after data showed Japanese services prices rose in another sign of mounting inflationary pressures on Bank of Japan policymakers.
Such pressures increased the odds of another interest rate hike by the Bank of Japan next month, with investors now waiting for more data before the March meeting.
The Price
The USD/JPY pair fell 0.2% today to 149.46 yen per dollar, with a session-high at 150.30.
The yen lost 0.3% against the dollar, the first loss in four days on profit-taking away from a 12-week high at 148.84.
Services Prices
Earlier Tokyo data showed services prices rose 3.1% in January, the fastest since June 2024, and up from 3.0% in December.
Higher services prices paid by consumers and corporations indicate higher inflationary pressures in the world’s third largest economy, which will likely prompt the Bank of Japan to hike rates once more.
Japanese Rates
Bank of Japan member Hajimi Takata asserted the importance of gradual interest rate hikes to contain the risks of inflation, which is approaching the 2% target.
BOJ Vice Governor Riyuzu Himuno said the path of monetary policies will depend on data, especially wages growth in both 2024 and 2025.
Recent data showed Japan’s GDP growth accelerated in the fourth quarter of last year, in turn raising pressures on BOJ policymakers.
Following the data, the odds of a BOJ March interest rate hike rose by 0.25% at the March meeting to 80%.