The dollar index (DXY00) on Thursday rose by +0.17%. The dollar recovered from a 6-week low on Thursday and moved higher as better-than-expected US economic news pushed T-note yields higher, strengthening the dollar’s interest rate differentials. Weekly jobless claims fell more than expected, and the Apr Philadelphia Fed business outlook survey unexpectedly rose to a 15-month high. Also, hawkish comments on Thursday from New York Fed President John Williams, who signaled he favors steady Fed policy, are supportive of the dollar.
The dollar initially moved lower on Thursday as the US and Iran are considering extending their ceasefire, which ends on Tuesday, by another two weeks to allow more time to negotiate a peace agreement, easing geopolitical concerns and reducing safe-haven demand for the dollar. Also, Thursday’s rally in the S&P 500 to a new record high reduced liquidity demand for the dollar.
US weekly initial unemployment claims fell -11,000 to 207,000, showing a stronger labor market than expectations of 213,000.
The US Apr Philadelphia Fed business outlook survey unexpectedly rose by +8.6 to a 15-month high of 26.7, stronger than expectations of a decline to 10.0.
US Mar manufacturing production unexpectedly fell -0.1% m/m, weaker than expectations of a +0.1% m/m increase.
New York Fed President John Williams signaled he favors steady Fed policy, saying the Fed remains well positioned to address the threat of a protracted supply shock from the war in the Middle East, which could raise inflation and dampen growth in the US. He added that high uncertainty should prevent the Fed from providing strong guidance on the future path of interest rates.
Swaps markets are discounting the odds at 1% for a +25 bp rate hike at the April 28-29 FOMC meeting.
The dollar continues to be undercut by a poor outlook for interest rate differentials, with the FOMC expected to cut interest rates by at least -25 bp in 2026, while the BOJ and ECB are expected to raise rates by at least +25 bp in 2026.
EUR/USD (^EURUSD) on Thursday fell by -0.15%. The euro fell from a 1.5-month high on Thursday and moved lower after the dollar rallied on better-than-expected US economic news. The euro was also under pressure on Thursday following the account of the ECB’s March policy meeting that signaled the ECB will keep interest rates steady in the near term. The euro initially moved higher on Thursday after the Eurozone Mar CPI was revised upward, a hawkish factor for ECB policy.
Eurozone Feb industrial production rose +0.4% m/m, stronger than expectations of +0.3% m/m.
The account of the ECB’s March 18-19 meeting signaled policymakers are leaning toward keeping monetary policy steady in the near term. Policymakers said, “The war was creating significant uncertainty and constitutes a negative supply shock, pushing up inflation and dampening economic activity in the coming months.”
Swaps are discounting a 13% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) on Thursday rose by +0.13%. The yen fell from a 1-week high against the dollar on Thursday and turned lower after the Nikkei Stock Index rallied to a new all-time high, reducing safe-haven demand for the yen. The yen initially moved higher on Thursday amid concerns about threats of intervention in forex markets to support the yen after Japanese finance minister Satsuki Katayama said she had close discussions on foreign exchange issues with US Treasury Secretary Bessent and that authorities are prepared for “bold” action if needed.
The markets are discounting a +19% chance of a 25 bp BOJ rate hike at the next meeting on April 28.
June COMEX gold (GCM26) on Thursday closed down -15.30 (-0.32%), and May COMEX silver (SIK26) closed down -0.918 (-1.15%).
Gold and silver prices gave up early gains today and turned lower as the dollar strengthened and T-note yields moved higher. Also, hawkish comments on Thursday from New York Fed President John Williams were bearish for precious metals when he signaled he favors a steady Fed policy. In addition, Thursday’s +3% rally in crude oil prices may boost inflation pressures, prompting the world’s central banks to tighten their monetary policies, a bearish factor for precious metals.
Precious metals initially moved higher on Thursday amid optimism that a push for diplomacy to end the US-Iran war will lower crude prices, easing inflation concerns. The US and Iran are considering extending their ceasefire, which ends on Tuesday, by another two weeks to allow more time to negotiate a peace agreement.
Precious metals remain supported as a safe haven amid concerns about the escalation of the US-Iran war, with the US naval blockade of the Strait of Hormuz entering its fourth day on Thursday. Also, uncertainty over US tariffs, US political turmoil, large US deficits, and government policy uncertainty are boosting demand for precious metals as a store of value.
Recent fund liquidation of precious metals is bearish for prices, as long holdings in gold ETFs fell to a 4-month low on March 31 after climbing to a 3.5-year high on February 27. Also, long holdings in silver ETFs fell to a 7-month low on March 27 after rising to a 3.5-year high on December 23.
Strong central bank demand for gold is supportive of gold prices, following the recent news that bullion held in China’s PBOC reserves rose by +160,000 ounces to 74.38 million troy ounces in March, the seventeenth consecutive month the PBOC has boosted its gold reserves.
China Q1 GDP rose +5.0% y/y, stronger than expectations of +4.8% y/y.
China Mar industrial production rose +5.7% y/y, stronger than expectations of +5.3% y/y.
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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