The dollar index (DXY00) on Thursday fell back from a 1-1/4 month high and posted a modest loss of -0.08%. The dollar gave up early gains Thursday after stocks recovered from sharp losses and stabilized, which reduced liquidity demand for the dollar. The dollar Thursday initially moved higher after stronger-than-expected U.S. PPI and unemployment claims reports boosted T-note yields. Also, hawkish comments Thursday from Cleveland Fed President Mester and St. Louis Fed President Bullard provided early support to the dollar.Â
Thursday’s U.S. economic news was mixed for the dollar. On the bearish side, Jan housing starts fell -4.5% m/m to a 2-1/2 year low of 1.309 million, weaker than expectations of 1.356 million. Also, the Feb Philadelphia Fed business outlook survey unexpectedly fell -15.4 to a 2-3/4 year low of -24.3, weaker than expectations of -7.5. On the bullish side, the Jan final-demand PPI rose +0.7% m/m and +6.0% y/y, stronger than expectations of +0.4% m/m and +5.4% y/y. Also, initial weekly unemployment claims unexpectedly fell -1,000 to 194,000, showing a stronger labor market than expectations of an increase to 200,000.
Fed comments Thursday were hawkish for Fed policy and bullish for the dollar. Cleveland Fed President Mester said she saw a "compelling" case for a +50 bp rate hike at the last FOMC meeting, and "at this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time." Also, St. Louis Fed President Bullard said, "continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low." He added that he "has argued consistently for front-loading of monetary policy" and "wouldn't rule out a 50 bp rate hike" at the March FOMC meeting.
EUR/USD (^EURUSD) on Thursday fell by -0.12%. The euro Thursday extended Wednesday’s losses to a 1-1/4 month low. Early strength in the dollar Thursday fueled long liquidation in the euro. Also, dovish comments Thursday from ECB Executive Board member Panetta weighed on EUR/USD when he said that small interest rate hikes would allow the ECB for more honed adjustment as previous tightening starts to slow economic activity. Â
USD/JPY (^USDJPY) on Thursday fell by -0.16%. The yen Thursday recovered from a 1-1/4 month low against the dollar and posted modest gains. Dollar weakness Thursday afternoon sparked short covering in the yen. The yen Thursday initially moved lower on higher T-note yields. Also, speculation that the appointment of former BOJ member Ueda to BOJ Governor will not affect BOJ policy is bearish for the yen.
Thursday’s Japanese trade news was mixed for the yen. Jan exports unexpectedly rose +3.5% y/y, stronger than expectations of a decline of -1.7% y/y. However, Jan imports rose +17.8% y/y, weaker than expectations of +20.6% y/y.
Other Japanese economic news bearish for the yen after Dec core machine orders rose +1.6% m/m, weaker than expectations of +2.8% m/m.
April gold (GCJ3) on Thursday closed up +6.50 (+0.35%), and March silver (SIH23) closed up +0.138 (+0.64%). Precious metals Thursday recovered from early losses and posted moderate gains. Metals prices rose Thursday on a reversal in the dollar after the dollar index retreated from a 1-1/4 month high and moved lower. Gold prices Thursday initially fell to a 1-1/2 month low on early dollar strength and higher global bond yields. Also, Thursday’s stronger-than-expected U.S. PPI and unemployment claims reports bolstered the outlook for additional Fed rate hikes and were bearish for metals. Finally, gold prices were under pressure due to the continued liquidation of gold holdings in ETFs after holdings of gold in ETFs fell to a new 2-3/4 year low Wednesday.
More Precious Metal News from Barchart
- Strength in U.S. Producer Prices and Hawkish Fed Speak Weighs on Stocks
- Dollar Rallies on Signs of U.S. Economic Strength
- Stocks Under Pressure as U.S. Economic Strength May Spur More Rate Hikes
- Dollar Ticks Lower on Strength in the British Pound and Euro
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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