Spot gold has given up less than half of yesterday’s gains this morning, reacting to a better than expected private payrolls report. Gold is trading near yesterday’s low of $1,203 an ounce. April gold futures are down a similar amount. Spot silver is modestly lower near $17.50/oz after spiking 2.75% yesterday.
Precious metals were up across the board Tuesday following combative statements from President Trump and his trade advisor Peter Navarro. Both stated a belief that America’s trading partners were manipulating their currencies lower. Concerns that these words may be the opening shot in a currency war sent investors into safe havens, and dropped the dollar to its worst one-day performance since November. This caught many speculators in the crowded long dollar trade off guard, forcing them to close out their positions. The resultant selling sent the DXY down 2.7% for January, the worst month for the dollar index since March 2016.
On Wednesday, the dollar did pick up some ground on the Japanese yen, rising 0.8%, and the euro, which fell to about $1.075. The rush into safe havens did push the 10-year Treasury yield back to 2.50%.
The big market news this morning was much better than expected private payrolls data. This helped US stocks surge into positive territory, joining nearly all global indexes. The ADP/Moody’s Analytics jobs report showed 246,000 new hires in January compared to just 165,000 expected. It was the best month for payroll growth since June.
Stocks have continued to fare well through earnings season. Most S&P 500 companies have announced their quarterly results, and a whopping 73% of them thus far have beaten analysts’ estimates. Oil prices were trending higher again in early trading on Wednesday. WTI crude is trading above $53/bbl on the NYMEX while its transatlantic counterpart Brent crude poked above $56/bbl, almost 1% higher.
FOMC Wraps Up
The Federal Reserve Open Market Committee (FOMC) will conclude its two-day policy meeting this afternoon at 2 pm EST. Not many fireworks are expected from this month’s meeting: Of the 94 economists surveyed by Bloomberg, just one believed the Fed would hike interest rates today. Chair Janet Yellen is not scheduled to hold a press conference following the end of the meeting, which is often taken as another sign that the committee is unlikely to make any policy changes this month.
For much of last year, the Bank of England (BOE) seemed to be the only other horse in a race against the Fed to start raising rates and normalizing monetary policy. (Meanwhile, the rest of the world looked toward cutting rates even further.) However, the U.K. is still dealing with the ramifications of the Brexit decision—even before Parliament makes the break-up with the EU official. The legislative battle over how to enact Article 50 of the EU charter, which governs the process for exiting the union, remains a mess. The sharp drop in the value of the pound sterling since last summer’s plebiscite has frustrated British consumers and put the central bank’s rate hike plans on hold.
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