The dollar index (DXY00) on Friday rose by +1.17%. The dollar Friday rallied sharply to a 3-week high. Friday’s stronger-than-expected U.S. economic reports on Jan payrolls and Jan ISM services pushed up T-note yields and strengthened the dollar’s interest rate differentials. The more robust reports also increase the chance that the Fed will keep raising interest rates, which is bullish for the dollar. The sell off in stock Friday also boosted some liquidity demand for the dollar.
Friday’s U.S. economic news was bullish for the dollar. Jan nonfarm payrolls surged +517,000, much stronger than expectations of +188,000 and the largest increase in 6 months. Also, the Jan unemployment rate unexpectedly fell -0.1 to a 53-year low of 3.4%, showing a stronger labor market than expectations of an increase to 3.6%. In addition, the Jan ISM services index rose +6.0 to 55.2, stronger than expectations of 50.5.
EUR/USD (^EURUSD) on Friday fell by -1.00%. Strength in the dollar Friday sparked long liquidation in the euro. Losses in EUR/USD were limited after Eurozone Dec producer prices rose more than expected, which is hawkish for ECB policy. Also, hawkish ECB comments today supported the euro after ECB Governing Council members Simkus and Kazimir said the planned 50 bp March rate hike by the ECB probably won't be the last.
Eurozone Dec PPI rose +1.1% m/m and +24.6% y/y, stronger than expectations of -0.4% m/m and +22.4% y/y.
The Eurozone Jan S&P Global composite PMI was revised up by +0.1 to 50.3 from the initially reported 50.2, the strongest pace of expansion in 7 months.
ECB Governing Council member Simkus said, "we're only now entering the mildly restrictive area of monetary policy," and next month's planned 50 bp rate hike by the ECB may not be the last.
ECB Governing Council member Kazimir said, "the fight against inflation is far from won," and the planned March rate hike by the ECB probably won't be the last.
USD/JPY (^USDJPY) on Friday rose by +1.87%. The yen Friday sold off sharply to a 2-week low against the dollar. The yen was under pressure after Friday’s stronger-than-expected U.S. economic reports on Jan payrolls and Jan ISM services pushed T-note yields sharply higher. Also, Friday’s comments from BOJ Governor Kuroda weighed on the yen when he said uncertainties over Japan’s economy are extremely high, so it’s appropriate “to continue with monetary easing” to firmly support the economy.
April gold (GCJ3) on Friday closed down -54.20 (-2.81%), and March silver (SIH23) closed down -1.210 (-5.12%). Precious metals Friday sold off sharply, with gold falling to a 1-month low and silver sinking to a 2-month low. Friday’s much stronger-than-expected U.S. economic reports on Jan payrolls and Jan ISM services pushed the dollar and T-note yields sharply higher and sparked long liquidation in precious metals. The strength in the U.S. labor market also increases the chances the Fed will keep raising interest rates, which is bearish for metals. In addition, precious metals were under pressure from hawkish ECB comments Friday that signal the ECB will keep raising interest rates.
More Precious Metal News from Barchart
- Stocks Rally Off Early Morning Lows
- Dollar Gains on U.S. Labor Market Strength and a Weak Euro
- Stocks Rally and Bond Yields Fall on Speculation Rate Hikes Nearing an End
- Dollar Tanks on Weak U.S. Economic Reports and Dovish Powell
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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