Investors kicked off the week on a cautious footing, ahead of the ECB’s meeting later this week, which is widely expected to leave interest rates unchanged (depo rate at 2%), while markets continued to digest Kevin Warsh’s nomination to replace Jerome Powell as Fed Chair. Sentiment was also weighed by the sharp sell-off in precious metals that began late last week.
Gold prices extended their decline, falling nearly 5% to around $4,600/ounce, while silver dropped nearly 7% to settle below $80/ounce, after peaking above $120 in the previous week. The US dollar strengthened against most major currencies, pushing the euro to just below $1.18. Brent prices fell by more than 6% as tensions in Iran showed signs of de-escalation.
Sovereign bond yields rose on both sides of the Atlantic, especially in the US as investors assessed the monetary policy views of the new Fed Chair nominee. Equity markets declined in Asia, reflecting early weakness in metals prices, but posted modest gains in the euro area and the US, as sentiment improved later in the session on strong US manufacturing data.
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