The dollar index (DXY00) on Wednesday rose by +0.04%. Wednesday’s slump in stocks boosted liquidity demand for the dollar. Also, mostly hawkish Fed comments Wednesday were bullish for the dollar. However, weaker T-note yields Wednesday undercut the dollar.
Fed comments Tuesday were mostly hawkish for monetary policy and bullish for the dollar. Minneapolis Fed President Kashkari said there's little evidence that the rate hikes done so far have had much effect on the labor market, so the FOMC "needs to do more" to get the labor market into balance. Also, Fed Governor Waller said we need more inflation moderation before changing the outlook, and the Fed may need to keep interest rates higher for longer than some expect. On the dovish side, New York Fed President Williams said a peak interest rate of 5.00-5.25% is still a reasonable view, and 25 bp rate increases seem like the right size.
EUR/USD (^EURUSD) on Wednesday fell by -0.12% but remained above Tuesday’s 1-month low. A stronger dollar Wednesday undercut the euro. However, losses in EUR/USD were limited by hawkish comments from ECB Vice President Guindos, who said he wouldn't exclude further interest rate hikes after the March ECB meeting.
Italy’s Dec retail sales fell -0.2% m/m, stronger than expectations of -0.7% m/m.
ECB Vice President Guindos said, "it may well be that financial markets are too optimistic with regard to inflation and our monetary response," and he wouldn't exclude further interest rate hikes after the March ECB meeting.
USD/JPY (^USDJPY) on Wednesday rose by +0.27%. The yen Wednesday posted moderate losses on comments from Japanese Prime Minister Kishida, who said he would carefully consider the market impact while choosing a new BOJ Governor, which signals little indication to signal a shift in the BOJ’s current ultra-easy yen-negative monetary policy.
Wednesday’s Japanese economic news was bullish for the yen. The Jan eco watchers outlook survey rose +2.5 to an 8-month high of 49.3, stronger than expectations of 47.6.
April gold (GCJ3) on Wednesday closed up +5.90 (+0.31%), and March silver (SIH23) closed up +0.243 (+1.10%). A weaker dollar Wednesday was supportive of metals prices. Also, Wednesday’s slump in stocks boosted safe-haven demand for precious metals. Liquidation of long gold positions in ETFs was bearish for gold after the amount of gold held in ETFs fell to a 2-3/4 year low Tuesday.
More Precious Metal News from Barchart
- Stocks Fall Back on Mixed Earnings and Higher Bond Yields
- Dollar Slips as Stocks Strengthen
- Stocks Mixed as Markets Brace for Fed Chair Powell’s Comments
- Dollar Pushes Higher as Bond Yields Climb and Stocks Fall
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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