The US dollar held onto its gains on Monday as investors assessed the likely shape of monetary policy if Kevin Warsh takes over as Federal Reserve Chair, while the sharp drop in precious metals and oil prices weighed heavily on commodity-linked currencies.

The decline in commodities also spilled over into equity markets in Asia and Europe at the start of a tense week that includes several central bank meetings, key economic data releases, and upcoming elections in Japan.

The Japanese yen returned to the spotlight after Prime Minister Sanae Takaichi said over the weekend that a weak yen has benefits, in campaign remarks that appeared at odds with the Finance Ministry’s ongoing efforts to limit currency weakness.

The dollar steadied in European trading after rising on Friday following President Donald Trump’s announcement naming Warsh as his nominee to lead the Federal Reserve. Analysts assume Warsh would be less inclined to push for rapid and aggressive rate cuts than some other candidates, although he has appeared somewhat more dovish than current Chair Jerome Powell.

The dollar index, which measures the US currency against a basket of major peers, stood at 97.21, little changed after a 1% gain on Friday.

Mohammad Al-Sarraf, FX and fixed income analyst at Danske Bank, said: “Kevin Warsh, at least on the surface, is the most dollar-supportive choice Trump could have made. It’s too early to say the political risk premium in the dollar has disappeared, but some short-term risks have eased.”

Market pricing still points to two US rate cuts this year, with the first not expected before June, the month Warsh could take office if confirmed by the Senate. The euro pulled back from the $1.20 level to trade at $1.1852, while sterling was broadly steady near $1.3690.

Both the European Central Bank and the Bank of England are expected to leave interest rates unchanged when they announce their decisions on Thursday.

Commodity currencies under pressure

Currencies of economies closely tied to commodity prices and risk appetite came under pressure on Monday. The Australian dollar fell by as much as 0.7% to $0.6908 ahead of the Reserve Bank of Australia’s rate decision on Tuesday, despite expectations of a hike, before trimming losses to trade down 0.3% at $0.6944.

The New Zealand dollar also slipped to $0.5991, while the Canadian dollar weakened by about 0.2%. Against the Norwegian krone, the dollar rose as much as 0.7%, as Brent and West Texas Intermediate crude futures dropped about 5% each amid signs of a possible easing in tensions between the United States and Iran.

Yen continues to weaken

The Japanese yen eased slightly to 154.90 per dollar, partly affected by Takaichi’s comments seen as tolerant of currency weakness, as well as expectations that her party could secure a strong victory in the upcoming lower house elections. An Asahi newspaper poll showed the ruling Liberal Democratic Party could comfortably surpass the 233-seat majority threshold in the 465-seat chamber.

Analysts at Société Générale said this scenario, although “overly optimistic,” would be “highly significant” for Takaichi if realized. They added it would “allow her to move ahead freely with expansionary policies,” with markets likely to respond first by pricing a higher risk premium on long-term Japanese government bonds and on the yen.

Investors had already been selling the yen and Japanese government bonds ahead of the election, expecting more expansionary fiscal policy if Takaichi wins a strong mandate, while the tax cuts promoted by her party could add further strain to already stretched public finances.

Even so, the weaker yen has recently found some support, as traders remain alert to the possibility of coordinated currency market intervention by the United States and Japan, after talk of exchange-rate checks by both sides late last month triggered a sharp jump in the yen.

Silver prices fell more than 16% in European trading on Monday, extending their losses for the third straight session and recording their lowest levels this year and the lowest in five weeks, amid a heavy selloff across precious metals markets, especially after CME Group raised margin requirements for gold and silver futures contracts.

Prices are also under pressure from the stronger US dollar against a basket of global currencies, supported by broad investor approval of Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve.

Price Overview

• Silver prices today: Silver dropped by 16.25% to $71.38 per ounce, the lowest level since December 31, down from the session opening at $85.23, and recording a session high at $88.96.

• At Friday’s settlement, silver prices plunged by 26.5%, marking a second consecutive daily loss and the largest single-day drop on record, driven by accelerated correction and profit-taking from the all-time high of $121.65 per ounce.

• Over January, silver prices still posted a 19% gain, marking the ninth consecutive monthly increase, supported by strong retail investor demand.

CME Group decisions

CME Group, the owner of the world’s largest and most important derivatives exchanges, announced on Saturday that it will raise margin requirements on metals futures contracts, with the new rules taking effect after market close on Monday, February 2, 2026.

The decision includes raising margin requirements on gold futures contracts on COMEX from 6% to 8%, while silver futures margins were lifted more sharply to 15% from 11%.

The increases also cover platinum and palladium contracts, in a move aimed at strengthening financial safeguards and reducing available leverage for traders following the record rally in precious metals prices.

US dollar

The US dollar index rose by 0.15% on Monday, extending gains for the second straight session and hitting a one-week high, reflecting continued strength in the US currency against a basket of major and minor currencies.

The advance follows positive market reaction to President Donald Trump’s nomination of Kevin Warsh as Federal Reserve Chair, a step that boosted confidence regarding the future direction of monetary policy.

Expectations have increased that the Federal Reserve may adopt a more hawkish stance in tackling inflation, prompting traders to add to long dollar positions against major and secondary currencies.

John Higgins, Chief Economist at Capital Economics, said the market reaction to Donald Trump’s nomination of Kevin Warsh as Federal Reserve Chair broadly aligns with their view that the president has made a relatively safe choice.

He added that the prevailing impression is that Warsh is not fully under presidential influence and would not undermine Federal Reserve independence or heighten concerns about currency weakness.

Gold prices fell more than 10% in European trading on Monday, deepening losses for a third consecutive session and hitting a four-week low, amid a violent selloff across precious metals markets, especially after CME Group raised margin requirements for gold and silver futures contracts.

Prices are also pressured by the rise of the US dollar against a basket of global currencies, supported by broad investor approval of Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair.

Price overview

Gold prices today fell by more than 10% to $4,402.83, the lowest level since January 5, from the session opening at $4,894.33, and recorded an intraday high at $4,894.33.

At Friday’s settlement, the precious metal lost 9.0%, marking its second consecutive daily loss and the largest single-day drop since 1983.

Beyond accelerated profit-taking from the all-time high at $5,589.13 per ounce, gold prices declined broadly due to easing concerns over Federal Reserve independence.

Over January, gold prices rose 13%, marking a sixth consecutive monthly gain and the largest monthly increase since September 1999, driven by safe-haven buying amid escalating global geopolitical and economic tensions.

CME Group decisions

CME Group, owner of the world’s largest derivatives exchanges, announced on Saturday an increase in margin requirements for metals futures contracts, with the new adjustments to take effect after market close on Monday, February 2, 2026.

The decision included raising margin requirements on gold futures contracts on COMEX from 6% to 8%, while silver futures margins were increased more sharply to 15% from 11%.

The increases also extended to platinum and palladium contracts, in a move aimed at strengthening financial safeguards and reducing available leverage for traders amid record highs in precious metals prices.

US dollar

The dollar index rose 0.15% on Monday, extending gains for a second straight session and recording a one-week high, reflecting continued strength in the US currency versus a basket of peers.

This advance comes as markets welcomed President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, reinforcing confidence about the future direction of monetary policy.

Expectations have increased that the Federal Reserve may adopt a more hawkish approach to fighting inflation, prompting traders to build long positions in the US dollar against major and minor currencies.

John Higgins, chief economist at Capital Economics, said the market reaction to Trump’s nomination of Kevin Warsh as Federal Reserve chair broadly aligns with the view that the president made a relatively safe choice.

Higgins added that the prevailing impression is that Warsh is not fully under presidential influence and is unlikely to undermine Federal Reserve independence or intensify concerns about currency weakness.

US interest rates

According to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the March meeting stands at 85%, while pricing for a 25-basis-point rate cut stands at 15%.

To reprice these probabilities, investors are closely watching upcoming US economic data, along with comments from Federal Reserve officials.

Gold outlook

Tim Waterer, chief market analyst at KCM Trade, said that while Warsh’s nomination was likely the initial trigger, it does not fully justify the sharp drop in precious metals prices, noting that forced liquidation and higher margin requirements created a chain reaction.

Waterer added that Warsh may cut interest rates shortly after taking office, but he is not the “ultra-dovish” candidate the market had largely expected.

He explained that Warsh’s policy stance is generally supportive of the dollar and therefore negative for gold, given his focus on inflation and his skepticism toward quantitative easing and large Federal Reserve balance sheets.

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed ETF, increased by about 0.57 metric tons on Friday, bringing total holdings to 1,087.10 metric tons.

The euro fell in European trading on Monday against a basket of global currencies, continuing to trade in negative territory for a second straight session versus the US dollar, under the watch of European monetary authorities, who warned that excessive strength in the euro exchange rate could renew inflation pressures in Europe.

The US dollar continues to advance in the foreign exchange market, supported by broad investor approval of Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair.

Price overview

The EUR/USD exchange rate fell by 0.1% today to $1.1839, from the day’s opening at $1.1851, and recorded an intraday high at $1.1875.

The euro ended Friday down 1.05%, marking its second daily loss in the past three sessions, due to correction and profit-taking from a five-year high at $1.2082.

Over January, the euro gained 1.1% against the dollar, posting its third consecutive monthly gain, supported by positive expectations for European economic growth and the assumption that European interest rates will be kept steady for as long as possible this year.

European monetary authorities

The euro’s rise above the $1.20 level for the first time in five years raised concerns among European monetary authorities, prompting European Central Bank policymakers to issue a series of warning remarks about the impact of currency strength on the outlook for inflation and economic growth.

Economists noted that a stronger euro could amplify the deflationary effect of strong Chinese exports, push the European Central Bank out of its “comfort zone,” and drive it toward further interest rate cuts.

Opinions and analysis

Geoff Yu, EMEA macro strategist at BNY, said that although the euro-dollar exchange rate stayed well above the ECB’s baseline scenario last year without triggering strong deflation risks, trade uncertainty remains in place.

Ray Attrill, head of FX strategy at National Australia Bank, said that ECB comments appear independent, but it is notable that the $1.20 level in EUR/USD seems to have acted as a trigger point.

Attrill added that the move in the euro/dollar pair, which was not especially strong until recently, somewhat masks broader euro strength, which will in turn be reflected in the ECB’s inflation expectations.

US dollar

The dollar index rose 0.15% on Monday, extending gains for a second straight session and recording a one-week high, reflecting continued strength in the US currency against a basket of global peers.

This rise comes as markets welcomed President Donald Trump’s nomination of Kevin Warsh to lead the Federal Reserve, a move that strengthened confidence about the future direction of monetary policy.

Expectations have increased that the Federal Reserve may adopt a more hawkish approach to fighting inflation, prompting traders to increase long positions in the US dollar against major and minor currencies.

John Higgins, chief economist at Capital Economics, said the market reaction to Trump’s nomination of Kevin Warsh as Federal Reserve chair broadly matches the view that the president made a relatively safe choice.

Higgins added that the prevailing impression is that Warsh is not fully under presidential influence and is unlikely to undermine Federal Reserve independence or intensify concerns about currency weakness.