PPI Inflation Reignites, U.S. Dollar Posts Its Largest Gain in Eight Months

Market Overview

Global markets were hit by a major shock last Friday. Former President Donald Trump officially nominated Kevin Warsh as the next Chair of the Federal Reserve, immediately reigniting hawkish policy expectations across financial markets. Although Warsh has softened his tone in recent years, his long-standing anti-inflation stance has raised investor concerns that the Fed could adopt a more aggressive balance sheet reduction and tighter monetary policy going forward.

At the same time, U.S. January Producer Price Index (PPI) data surprised to the upside, rising 0.5% month-over-month, reinforcing the view that inflation pressures remain stubborn. As a result, all three major U.S. equity indices closed lower, while the U.S. Dollar Index recorded its largest single-day gain since May 2025.

On the equity front, Apple closed up 0.46% following earnings. SanDisk initially surged as much as 21% at the open on positive storage-sector news, but gains faded sharply, with the stock ending Friday up just under 7%.

Macro and FX markets saw heightened volatility:

• U.S. Dollar & Treasuries:

• The U.S. Dollar Index surged 0.84% in a single session. Treasury yields rose broadly as inflation concerns resurfaced, with the 10-year yield up 1.21 basis points.

• CNY & JPY:

• Under pressure from the stronger dollar, both the Japanese yen and the Chinese yuan gave back part of their recent gains. However, the offshore yuan still posted a solid appreciation over January as a whole.

• Cryptocurrencies:

• Market sentiment deteriorated sharply, with Bitcoin plunging below the USD 80,000 level over the weekend, marking a significant technical breakdown.

• Commodities: A “Bloody Friday” Across the Board

• Precious Metals Flash Crash:

• Safe-haven assets were heavily liquidated. Spot gold plunged 10%, erasing its weekly gains and falling back below USD 4,900.

• Spot silver experienced extreme volatility, collapsing as much as 36% intraday to below USD 73, driven by higher margin requirements and aggressive profit-taking. Silver still closed the day down more than 26%.

• Industrial Metals:

• COMEX copper retraced all of Thursdays gains, falling 5% on the day.

• Crude Oil Diverges:

• Crude oil initially declined alongside broader commodities but later rebounded, supported by ongoing U.S.-Iran geopolitical tensions. Oil prices surged 14% in January, marking the strongest monthly performance since July 2023.

Key Market Themes to WatchCrypto Markets Continue to Slide Over the Weekend

The cryptocurrency market saw intensified selling pressure following Fridays rout. On Saturday, Bitcoin losses deepened to nearly 10%, hitting an intraday low of USD 75,709.88, a level last seen in April 2025. Total crypto market capitalization fell by approximately USD 111 billion over the past 24 hours.

Trump‘s nomination of Warsh boosted the dollar and dismantled depreciation expectations, triggering USD 1.6 billion in forced liquidations. With weak retail participation, persistent ETF outflows, and regulatory delays, Bitcoin’s role as a defensive asset continues to erode.

CME Raises Gold and Silver Margin Requirements Again

The CME Group announced another sharp increase in margin requirements for precious metals futures:

• Gold margin: raised from 6% to 8%

• Silver margin: raised from 11% to 15%

The new requirements will take effect after Monday‘s close. This move follows the recent reform of the “floating margin” mechanism, highlighting exchanges’ efforts to accelerate deleveraging and mitigate risk amid extreme volatility. Market participants are increasingly concerned about a replay of historical episodes such as 1980 or 2011, when exchange intervention triggered rapid market collapses.

Upcoming Economic Events (GMT+8)

22:45 (US) – S&P Global U.S. Manufacturing PMI (Final, January)

23:00 (US) – ISM Manufacturing PMI (January)

Overnight:

01:30 (US) – Speech by Raphael Bostic, Atlanta Fed President and 2027 FOMC voting member