Dollar Slightly Lower as British Pound Rebounds

The dollar index (DXY00) on Thursday fell by -0.10%.  The dollar Thursday posted modest losses.  Early strength in GBP/USD Thursday weighed on the dollar as the British Pound rallied briefly after UK Prime Minister Truss announced her resignation.  However, losses in the dollar were limited Thursday after the 10-year T-note soared to a 14-year high and as stocks retreated, which boosted the liquidity demand for the dollar.

Thursday’s U.S. economic news was mixed for the dollar.  On the negative side, the Oct Philadelphia Fed business outlook survey rose +1.2 to -8.7, weaker than expectations of -5.0.  Also, Sep leading indicators fell -0.4% m/m.  weaker than expectations of -0.3% m/m.  On the positive side, weekly initial unemployment claims unexpectedly fell -12,000 to 214,000, showing a stronger labor market than expectations of an increase to 233,000.  Also, Sep existing home sales fell -1.5% to a 2-1/4 year low of 4.71 million, slightly stronger than expectations of 4.70 million.

Fed comments Thursday were hawkish for Fed policy and bullish for the dollar.  Fed Governor Cook said, "inflation is too high, and this will likely require ongoing Fed rate hikes and then keeping policy restrictive for some time" to get price pressures under control.  Also, Philadelphia Fed President Harker said the Fed is likely to raise interest rates to "well above" 4% this year and hold then at restrictive levels to combat inflation while leaving the door open to doing more if needed.

EUR/USD (^EURUSD) on Thursday rose by +0.04%.  The euro Thursday moved slightly higher.  Strength in German bund yields supporting gains in EUR/USD Thursday after the 10-year German bund yield climbed to an 11-year high. Also, an unexpected increase in French Oct manufacturing confidence supported the euro. 

Thursday’s Eurozone economic news was supportive of EUR/USD.  France Oct manufacturing confidence unexpectedly rose +1 to 103, stronger than expectations of a decline to 100.  Also, the German Sep PPI rose a record 45.8% y/y, stronger than expectations of +45.4% y/y.

USD/JPY (^USDJPY) on Thursday rose by +0.23%.  The yen Thursday moved lower for the twelfth consecutive session and sank to a new 32-year low against the dollar.  Higher T-note yields Thursday undercut the yen after the 10-year T-note yield jumped to a 14-year high.  Also, Thursday’s action by the BOJ to boost QE was bearish for the yen after the BOJ announced unscheduled bond purchases to lower government bond yields. The yen Thursday recovered its losses briefly on comments from Masato Kanda, Japan's top currency official, who said excessive moves in currency markets "are becoming even more intolerable."

Thursday’s Japanese trade news was supportive of the yen.  Japan Sep exports rose +28.9% y/y, stronger than expectations of +26.6% y/y and the biggest increase in 14 months.  However, Japan Sep imports rose +45.9% y/y, stronger than expectations of +44.9% y/y.

The BOJ on Thursday announced unscheduled bond purchases of 250 billion yen ($1.7 billion) of 5-year maturities and longer after the 10-year JGB bond yield rose above +0.25%, the upper limit of the BOJ's 10-year yield target.

December gold (GCZ22) Thursday closed up +2.60 (+0.16%), and December silver (SIZ22) closed up +0.330 (+1.80%).  Gold and silver Thursday closed moderately higher, with gold recovering from a 3-week low.  A weaker dollar Thursday was bullish for metals prices.  Gains in gold were limited after the 10-year German bund yield rose to an 11-year high Thursday, and the 10-year T-note yield rose to a 14-year high.  Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low Wednesday. 

• Stocks Lower as Treasury Yields Rise
• Dollar Rallies as T-Note Yields Climb and Stocks Fall
• Stocks Slightly Lower Despite Positive Q3 Corporate Earnings
• Dollar Slightly Higher as the Yen Continues to Fall