The dollar index (DXY00) on Wednesday rose by +0.07%. The dollar index Wednesday extended Tuesday’s gains up to a new 3-1/4 month high. Wednesday’s better-than-expected U.S. reports on Feb ADP employment change and Jan JOLTS job openings show strength in the labor market that is hawkish for Fed policy and bullish for the dollar. However, gains in the dollar were limited after Fed Chair Powell said the size of its rate hike at the March FOMC meeting is not yet decided.
Wednesday’s U.S. economic news was hawkish for Fed policy and bullish for the dollar. The Feb ADP employment change rose +242,000, stronger than expectations of +200,000. Also, the Jan JOLTS job openings fell -410,000 to 10.824 million, stronger than expectations of 10.546 million.
On Wednesday, Fed Chair Powell said, "the FOMC has not made any decision about the pace of rate hikes at the March meeting" and won't do so until they see the incoming data.
Wednesday’s Fed Beige Book was neutral to slightly bearish for the dollar. The Fed Beige Book said, "overall economic activity increased slightly in early 2023. However, amid heightened uncertainty, contacts did not expect economic conditions to improve much in the months ahead." The report was based on information collected by the Fed's 12 regional banks through Feb 27.
EUR/USD (^EURUSD) on Wednesday fell by -0.05%. The euro Wednesday extended Tuesday’s losses down to a 2-month low. Dovish comments from ECB Governing Council member Visco weighed on the euro, along with Wednesday’s economic news that showed Eurozone Q4 GDP revised lower. Losses in EUR/US were limited after German Jan industrial production posted its biggest increase in 2-1/2 years.
ECB Governing Council member Visco said, "uncertainty is so high that the Governing Council of the ECB has agreed to decide meeting by meeting, without forward guidance. Therefore, I don't appreciate statements by my colleagues about future and prolonged interest rate hikes."
Wednesday’s Eurozone economic news was mixed for EUR/USD. On the negative side, Eurozone Q4 GDP was revised downward to unchanged m/m and+1.8% y/y from the initially reported +0.1% m/m and +1.9% y/y. Also, German Jan retail sales unexpectedly fell -0.3% m/m, weaker than expectations of +2.3% m/m. On the positive side, German Jan industrial production rose +3.5% m/m, stronger than expectations of +1.4% m/m and the largest increase in 2-1/2 years.
USD/JPY (^USDJPY) on Wednesday rose by +0.09%. The yen Wednesday extended Tuesday’s slide to a 2-3/4 month low against the dollar. Central bank divergence is weighing on the yen after Fed Chair Powell Tuesday said the Fed is likely to raise interest rates higher and potentially faster than previously anticipated. That is in contrast to the BOJ, which is expected to maintain QE and record-low interest rates. Also, higher T-note yields Wednesday pressured the yen.
Wednesday’s Japanese economic news was mixed for the yen. On the bearish side, the Jan leading index CI fell -0.4 to a 2-year low of 96.5, weaker than expectations of 96.9. Conversely, the Feb eco watchers expectations survey rose +1.5 to a 9-month high of 50.8, stronger than expectations of 49.7.
April gold (GCJ3) on Wednesday closed down -1.40 (-0.08%), and May silver (SIK23) closed down -0.048 (-0.24%). Precious metals Wednesday closed moderately lower, with gold falling to a 1-week low and silver dropping to a 4-1/4 month low. A rally in the dollar index Wednesday to a 3-1/4 month high was bearish for metals prices. Also, stronger-than-expected U.S. economic reports Wednesday on Feb ADP employment and Jan JOLTS job openings signal labor market strength that is hawkish for Fed policy. The continued liquidation of long gold positions in ETFs also weighed on gold prices after holdings of gold in ETFs fell to a new 2-3/4 year low Tuesday. Metals spiked higher briefly Wednesday after Fed Chair Powell said, “the FOMC has not made any decision about the pace of rate hikes at the March meeting,"
More Precious Metal News from Barchart
- Stocks Mixed After Powell Says No Decision Made Yet on Pace of Rate Hikes
- Dollar Soars on Hawkish Fed
- Stocks Fall on Hawkish Powell
- Dollar Slips on Strength in the 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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