Precious Metals Rebound (09-13 February)

Global markets began the week with the US dollar under pressure, falling under 97.5 for a second consecutive session. The greenback’s decline was fueled by a combination of improved risk sentiment and expectations of stable Federal Reserve policy with potential rate cuts on the horizon. Investors remained cautious as they awaited a backlog of delayed US economic data, including employment and inflation figures.

In commodities, gold reclaimed the $5,000 per ounce threshold, marking a one-week high as a softer dollar and central bank purchases provided strong support. Silver led the complex with a significant 5% jump, extending a sharp rebound from recent lows. These moves reflect a broader appetite for safe-haven assets and expectations of looser monetary policy in the United States.

Meanwhile, fixed income markets reacted to shifting political and central bank narratives. While US Treasury yields edged higher on data anticipation and reports of reduced foreign holdings, UK gilt yields dropped significantly following a dovish tilt from the Bank of England. In Japan, bond yields rose as markets priced in the fiscal implications of a sweeping election victory for the LDP.

Market Drivers & Catalysts

• Delayed US Macro Data: Markets are navigating a vacuum of key employment and inflation data, leading to choppy trading and heightened sensitivity to Federal Reserve commentary.
• LDP Election Mandate: The LDP’s landslide victory has provided Prime Minister Sanae Takaichi with a clear mandate for expansionary fiscal measures, pressuring Japanese bonds while supporting equities.
• BoE Dovish Shift: An unexpected 5-4 vote split at the Bank of England has signaled growing internal support for rate cuts as inflation concerns begin to fade.
• Geopolitical De-escalation: Easing tensions between the US and Iran have reduced the risk premium in energy markets, leading to a visible retreat in crude oil prices.
• Foreign Treasury Liquidation: Reports of China reducing its holdings of US Treasury debt have introduced upward pressure on long-term yields despite the broader dollar weakness.

Fixed Income

• US 10-Year Treasury: Yields rose to 4.23% as investors positioned themselves for upcoming retail sales and labor data. While the Fed is expected to hold rates in March, reports of reduced Chinese holdings and expectations of later cuts are influencing the curve.
• UK 10-Year Gilt: Yields dropped to 4.55% following the Bank of England’s decision to maintain rates at 3.75%. The narrow 5-4 vote split highlighted a more dovish outlook than previously anticipated by the market.
• Japan 10-Year Government Bond: Yields rose to 2.27% in the wake of the LDP election victory. The market is weighing the impact of expansionary fiscal policies and potential tax cuts on the country’s debt profile.

Commodities

Gold rose past $5,000/oz to reach a one-week high. Support is being driven by a softer dollar index, consistent purchases by China’s central bank, and a cooling of geopolitical tensions in the Middle East.

Silver jumped approximately 5% to settle near $82. The metal has seen a sharp rebound from recent lows, supported by a resurgence in risk sentiment and expectations of looser US monetary policy.

Currencies

• U.S. Dollar Index (DXY): Fell below the 97.5 level. The currency remains under pressure from stronger risk appetite and market anticipation of eventual Fed rate cuts later in 2026.
• Euro: Climbed past $1.1850 against the dollar. The currency is benefiting from the softening greenback and expectations that the ECB will maintain a steady policy stance compared to the Fed.
• British Pound: Fell toward $1.36, marking its sharpest weekly decline since October. Pressure stems from domestic political uncertainty and the Bank of England’s shift toward a more dovish policy stance.
• Japanese Yen: Recovered to approximately 156.5 per dollar. While the LDP victory supports fiscal expansion, official warnings from Japanese authorities regarding FX volatility have helped stabilize the currency.

Economic Data Highlights

• Euro Area CPI (Jan): Annual inflation slowed to 1.7% YoY, down from 2.0% in December. This marks the lowest level since September 2024, signaling a significant easing of price pressures across the bloc.
• ECB Interest Rate Decision (Feb): Rates remained unchanged, with the deposit rate at 2%. The ECB reiterated its commitment to the 2% medium-term target despite global economic uncertainties.
• U.S. S&P Global Services PMI (Jan): The final reading rose to 52.7, surpassing initial estimates. The Composite PMI also climbed to 53.0, indicating a steady expansion in the private sector.

Macro Calendar Highlights

• U.S. Consumer Price Index (CPI) Delayed Release
• U.S. Non-Farm Payrolls and Unemployment Data
• OPEC+ Monthly Oil Market Report
• IEA Global Energy Outlook Summary
• Bank of Japan Policy Review and Fiscal Projections