2026-02-04 14:57:29
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Against the backdrop of sharp moves in precious-metal prices and heightened attention on the nomination of a new Federal Reserve chair, the foreign-exchange market is undergoing a new round of repricing around the strength of the US dollar and the future path of interest rates. This process reflects an ongoing reassessment of the terminal policy rate, the inflation outlook, and the direction of global capital flows.
US Dollar Index: A Cyclical Rebound After a Weak Year
As 2026 begins, the US Dollar Index has been coming off a year of broad weakness and, at one point, touched its lowest levels in nearly four years, briefly falling below the 97 mark in early January and approaching the 95.5 area. As markets have repriced their expectations for interest rates and the broader policy outlook, the Dollar Index has since rebounded from those lows, moving back above 97 in early February and showing short-term technical characteristics consistent with a rebound from oversold territory.
This pattern reflects a combination of fundamental and positioning factors. On the one hand, declining US real yields since 2025 and a degree of recovery in some overseas economies have weighed on the dollar’s medium-term performance. On the other hand, following a prolonged period of dollar softness and the build-up of short positions, even mildly more hawkish interpretations of the expected rate path have the potential to trigger episodic moves in the opposite direction. In such an environment, the dollar tends to display higher volatility and greater sensitivity to shifts in macro expectations.
Kevin Warsh and Expectations for the Rate Path
A key variable that markets are monitoring is what the nomination of Kevin Warsh as Federal Reserve chair may imply for the policy trajectory. Publicly available commentary suggests that in previous remarks he has highlighted the potential impact of productivity gains and technological progress on inflation dynamics, while also repeatedly stressing attention to financial stability and asset-price developments.
Interest?rate futures and analytical reports broadly outline the following contours of expectations:
Within this framework, the US yield curve has shown signs of short-end yields edging lower while longer-dated yields remain relatively resilient, leading to a steeper curve profile. The FX market’s response to these developments is largely visible in the repricing of interest?rate differentials, the term structure of yields, and expectations for future volatility.
Precious-Metal Volatility and the Dollar: A Changing Relationship
The recent sharp declines and subsequent rebounds in gold and silver prices have, at least in the short term, led to a deviation from the simple, traditional pattern of a straightforward inverse relationship between a stronger dollar and weaker gold prices. During a period of cyclical dollar strength and shifting rate expectations, the precious-metals market experienced pronounced volatility, influenced by factors such as position liquidations, margin calls, and broader risk management adjustments.
Many market commentaries attribute this episode primarily to shifts in leverage structures and sentiment rather than to any single macroeconomic release. At the same time, medium- to long-term considerations—including the level and persistence of inflation, the evolution of trade tensions, geopolitical developments, and central?bank asset allocation—continue to feature in discussions of the role of precious metals in the monetary system, in portfolio diversification, and in connection with industrial demand. In this phase, the relationship between the dollar and precious metals appears more complex and driven by multiple factors, rather than by a single dominant driver.
Major Currency Pairs: Between Rate Differentials and Risk Sentiment
As the Dollar Index has rebounded from its lows, the behavior of major currency pairs reflects a combined response to interest-rate differentials, growth expectations, and broader risk sentiment:
These patterns suggest that exchange-rate movements are shaped by the interaction of different countries’ policy cycles, growth trajectories, and risk-appetite dynamics, rather than being determined by any single factor.
Key Macro Discussion Themes
Around the debate on the future rate path, current macro discussions are broadly centered on three themes: growth, inflation, and productivity.
Taken together, these elements are leading market participants to formulate different scenarios for the terminal rate, the long-run equilibrium policy rate, and the medium- to long-term level of the US dollar, and these views are being reflected in price movements across FX and rates markets.
Upway Global: Driving New Patterns in Gold Investment
Upway Global, a prominent brand under Upway Group, has been rooted in the market for over 16 years, holding Grade AA member status (No. 084) at the HKGX and serving as a core member of Bullion Group. As a key player in the precious metals investment sector, Upway Global strictly follows international purity and quality standards, earning the prestigious “Recognised Delivery Bar Refiner Certificate,” ranking among Hong Kong’s top refiners. The brand focuses on offering diverse electronic trading in precious metals, its outstanding market performance includes a single-day XAU turnover reaching USD 80.75 billion in 2025, with over 2.1 million active members and over 7.6 billion cumulative orders, maintaining the highest average monthly trading volume at the HKGX.
At the same time, Upway Global recognises that user experience is central to brand competitiveness. Our platform offers 24/7 multilingual customer support, with dedicated service specialists assisting clients around the clock. Standing side by side with investors in a rapidly changing market, Upway Global helps clients achieve steady asset growth through reliable and professional services.
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