PPI Data & Kevin Warsh: Dollar Gets New Fuel
The US dollar immediately surged and the Treasury yield curve steepened after Donald Trump nominated Kevin Warsh as the next Federal Reserve chairman—a figure the market views as relatively hawkish. At the same time, the historic fall in precious metals pressured commodity currencies and further boosted dollar flows.
The Bloomberg Dollar Spot Index briefly rose as much as +0.9% before paring gains on Friday (January 30th), but remains headed for a weekly decline of around -0.6%. Throughout the Asian and London sessions, the dollar had already strengthened on speculation about Warsh's selection—although on a monthly basis, the index is still expected to fall ~1.4% in January, with month-end flows adding to the choppy movement.
Data-wise, Friday's release showed a hotter-than-expected US PPI: final demand +0.5% month-on-month (expected +0.2%). The combination of a hawkish Warren Buffett plus strong producer price data was a package that boosted the dollar and yields, as markets repriced the prospect of a less dovish policy.
FX pressure intensified when gold and silver plunged sharply on Friday—gold fell more than 10% (the largest since the early 1980s) and silver plunged 26% (an intraday record). The effect spread to commodity currencies and several major pairs: AUD/USD fell 1.6% to 0.6940, USD/CHF rose 1.2% to 0.7731, and USD/SEK rose 1.1% to 8.9050.
In Canada, the Canadian dollar (loonie) weakened by 0.9% to 1.3617 per USD, dragged down by weaker GDP data: November GDP was flat month-on-month (estimated +0.1%) and +0.6% year-on-year (estimated +0.7%). In the Eurozone, EUR/USD fell 1% to 1.1855 despite data showing better-than-expected growth at the end of last year—but the euro still recorded gains of around 1% throughout January.
Meanwhile, in Japan, USD/JPY rose 1.1% to 154.76 and broke through the 100-DMA (153.98). Monthly data from the Japanese Ministry of Finance confirmed no spending on direct yen-strengthening interventions through January 28, and Tokyo's core inflation (ex fresh food) slowed to 2.0% y/y from 2.3% in December—making the room for a "hawkish surprise" from Japan seem more limited.
Source: Newsmaker.id
