Greenback Steadies While Euro Weakens: Market Unwinds Currency Shifts

The dollar index managed to eke out modest appreciation on Thursday, gaining +0.05%, as markets digested a complex mix of economic signals and central bank guidance. While the dollar naar euro exchange rate showed particular weakness, with EUR/USD sliding -0.14%, the broader dollar movement reflected a day of competing pressures in global currency markets.

Dollar’s Mixed Signals: Weak Data Offset by Fed Divergence

The greenback’s trajectory proved volatile throughout the session. Initial weakness emerged after US inflation data disappointed expectations—November CPI came in at +2.7% year-over-year, trailing the forecast of +3.1%, while core CPI rose just +2.6% annually, marking the slowest pace in 4.5 years. The Philadelphia Fed’s December business outlook survey similarly missed projections, falling to -10.2 instead of the anticipated rise to +2.3.

These dovish economic readings naturally pressured the dollar, raising market bets that the Federal Reserve would maintain its accommodative stance. Currently, markets are pricing in roughly a 27% probability of a 25 basis point rate cut at the January 27-28 FOMC meeting.

However, the dollar found footing after US weekly initial jobless claims fell by 13,000 to 224,000, almost exactly meeting expectations. This modest jobs market resilience provided enough support to reverse early dollar losses and stabilize the greenback during Thursday trading.

Beyond data, the dollar naar euro dynamic and broader dollar sentiment face headwinds from Federal Reserve policy divergence. The central bank has commenced purchasing $40 billion monthly in Treasury bills, boosting system liquidity since last Friday—a dollar-negative development. More significantly, market speculation surrounding President Trump’s upcoming Fed Chair appointment has weighed on the currency. Bloomberg sources suggest National Economic Council Director Kevin Hassett remains the leading candidate, with markets viewing him as the most dovish option available. The president indicated a formal announcement would arrive in early 2026, adding uncertainty to dollar positioning.

Stock market strength on Thursday also reduced traditional safe-haven demand for the dollar, further capping its upside on the day.

Euro Under Siege: ECB Signals End to Rate-Cut Cycle

The dollar naar euro weakness told a deeper story about diverging monetary outlooks. EUR/USD’s -0.14% decline came despite initial support from the European Central Bank’s decision to maintain interest rates as expected, with the deposit facility rate holding at 2.00%.

The ECB actually raised its 2025 Eurozone GDP growth forecast to 1.4% from 1.2%, signaling improved economic momentum. ECB President Lagarde reinforced this optimism with dovish commentary, describing the Eurozone economy as “resilient” and highlighting elevated inflation uncertainty. Yet rather than lifting the euro, these remarks prompted profit-taking.

The real catalyst for euro weakness centered on market-moving commentary suggesting the ECB views its rate-cutting cycle as likely concluded. With inflation trajectories and growth expectations in view, fewer reductions appear probable. Compounding this, fiscal concerns across the Eurozone pressured the single currency. Germany announced plans to increase federal debt issuance by nearly 20% next year, reaching a record 512 billion euros ($601 billion USD), signaling elevated government spending ahead.

Market pricing now reflects merely a 1% probability of a 25 basis point ECB rate cut at February’s policy meeting, reinforcing expectations of policy stability.

Yen Advances Despite Fiscal Headwinds; Precious Metals Retreat

The yen strengthened modestly on Thursday amid dollar weakness and declining US Treasury yields, with USD/JPY falling -0.08%. Markets remain heavily positioned for a Bank of Japan rate increase on Friday, with a 96% probability currently priced in. This expectation of tightening Japanese policy supported the yen’s tone throughout the session.

However, gains remained capped after Kyodo reported that Japan’s government is contemplating a record budget exceeding 120 trillion yen ($775 billion USD) for fiscal 2026, raising fiscal sustainability questions that weighed on yen strength.

Precious metals experienced distinct selling pressure on Thursday. February COMEX gold futures declined $9.40 per troy ounce (down -0.21%), while March COMEX silver contracts fell $1.682 per ounce (down -2.51%). The selloff reflected multiple crosscurrents: equity market strength reduced safe-haven appeal, while hawkish commentary from ECB President Lagarde and Bank of England Governor Bailey suggested central banks remained comfortable maintaining restrictive policy stances.

Anticipated BOJ rate increases added further headwinds to precious metals demand. Silver faced particular liquidation pressures following its spectacular three-week rally to record highs, with profit-taking accelerating as the dollar showed signs of stabilization.

Support Structures Building Beneath Metals

Despite Thursday’s weakness, fundamental support for precious metals remains robust. The Federal Reserve’s dovish policy shift—particularly if President Trump appoints a dovish Fed Chair as anticipated—positions metals favorably for 2026. Weaker-than-expected US economic data continues to support the bullish case for gold and silver as inflation hedges and store-of-value assets.

Geopolitical uncertainty spanning Ukraine, the Middle East, and Venezuela, combined with potential US tariff escalation, continues driving safe-haven demand. China’s People’s Bank expanded its gold reserves by 30,000 troy ounces to 74.1 million in November, marking the thirteenth consecutive month of accumulation. Globally, central banks purchased 220 metric tons of gold during Q3, up 28% from the prior quarter.

Silver inventories linked to the Shanghai Futures Exchange fell to 519,000 kilograms on November 21—the lowest level in a decade—suggesting tight supply dynamics. Silver ETF holdings rebounded to nearly 3.5-year highs on Tuesday after reaching three-year peaks on October 21, indicating renewed investor interest despite recent profit-taking patterns.