The dollar index (DXY00) on Thursday fell -0.84% and sank to a 7-month low. The dollar was under pressure Thursday as a benign U.S. Dec CPI report pushed the 10-year T-note down to a 4-week low. Also, strength in stocks Thursday curbed liquidity demand for the dollar. Losses in the dollar accelerated Thursday after Philadelphia Fed President Harker said he favored the Fed slowing its pace of rate hikes to 25 bp.
Thursday’s U.S. economic news was mixed for Fed policy and the dollar. On the bearish side, the Dec CPI report of -0.1% m/m and +6.5% y/y was right in line with market expectations, and the +6.5% y/y gain was the smallest in 14 months. However, on the bullish side, weekly initial unemployment claims unexpectedly fell -1,000 to a 3-1/2 month low of 205,000, showing a stronger labor market than expectations of an increase to 215,000.
Fed comments Thursday were mixed for the dollar. On the bearish side, Philadelphia Fed President Harker said, "In my view, interest rate hikes of +25 bp will be appropriate going forward." Conversely, St. Louis Fed President Bullard said that "it would be appropriate for the Fed to raise the fed funds rate above 5% as soon as possible" to expeditiously ensure that price pressures are subdued.
EUR/USD (^EURUSD) on Thursday rose by +0.85% and posted an 8-1/2 month high. A slump in the dollar Thursday was bullish for the euro. Also, improved optimism about the Eurozone’s economic outlook supported the euro after the Euro Stoxx 50 on Thursday rallied to a 10-3/4 month high.
USD/JPY (^USDJPY) on Thursday fell sharply by -2.38%. The yen Thursday surged to a 7-1/4 month high against the dollar on speculation the BOJ will soon end its ultra-easy monetary policy. The yen catapulted higher Thursday after Yomiuri reported that the BOJ would review the side effects of its ultra-easy monetary policy at their policy meeting next week. The yen also garnered support from soaring Japanese government bond yields after the 10-year JGB bond yield rose to a 7-1/2 year high today at 0.514%. In addition, lower T-note yields Thursday were supportive for the yen.
Thursday’s Japanese economic news supported the yen after the Dec eco watchers outlook survey unexpectedly rose +1.9 to 47.0, stronger than expectations of a decline to 45.0.
February gold (GCG3) on Thursday closed up +19.90 (+1.06%), and March silver (SIH23) closed up +0.523 (+2.23%). Precious metals Thursday rallied moderately, with gold posting an 8-month high and silver posting a 1-week high. A slump in the dollar index Thursday to a 7-month low was bullish for metals. Also, lower global bond yields today were bullish for metals. Precious metals also rallied on a benign U.S. Dec CPI report and dovish comments from Philadelphia Fed President Harker, who said he favored +25 bp federal funds rate hikes from now on.
More Precious Metal News from Barchart
- Stocks Rally After As-Expected CPI Report
- Dollar Little Changed on Lower Bond Yields and Stronger Stocks
- Stocks Climb on Hopes for U.S. Consumer Prices to Soften
- Dollar Firms as T-note Yields Climb
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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