The dollar index (DXY00) on Thursday fell by -0.18% as strength in stocks sapped liquidity demand for the dollar. Also, a slide in T-note yields undercut the dollar. In addition, the dollar was undercut by strength in the yuan after China boosted stimulus measures.
Thursday’s U.S. economic news was bullish for the dollar. Weekly initial unemployment claims unexpectedly fell -2,000 to 243,000, showing a stronger labor market than expectations of an increase to 252,000. Also, U.S. Q2 GDP was revised slightly higher to -0.6% (q/q annualized) from the previously reported -0.7%.
A plethora of Fed comments Thursday were hawkish for Fed policy and bullish for the dollar. St. Louis Fed President Bullard said he favors "front loading" of interest rate hikes and wants to raise the fed funds rate to 3.75-4.00% this year. Also, Philadelphia Fed President Harker said the Fed is in "no way done" raising rates and needs to raise interest rates to a restrictive stance to get inflation under control. In addition, Kansas City Fed President George said the Fed has not yet raised interest rates to levels that are weighing on the economy and may have to take them above 4% for a time. Finally, Atlanta Fed President Bostic said if U.S. economic data remains strong and inflation doesn't clearly soften, "then it may make a case for another 75 bp rate hike" at the September FOMC meeting.
EUR/USD (^EURUSD) on Thursday rose by +0.04%. The euro Thursday recovered from early losses and moved slightly higher as dollar weakness sparked short covering in EUR/USD. Also, better-than expected economic news supported the euro after German Q2 GDP was revised higher. EUR/USD Thursday initially moved lower on economic concerns after UBS said the Eurozone economy is already in a “shallow” recession, and Thursday’s economic news showed the German Aug IFO business climate index fell -0.2 to a 2-year low of 88.5.
Soaring energy prices may further weigh on the Eurozone economy and are bearish for EUR/USD after German electricity prices for next year surged +17% Thursday to a record 750 euros a megawatt-hour and French electricity prices jumped +12% to a record 880 euros a megawatt-hour.
The German Aug IFO business climate index fell -0.2 to a 2-year low of 88.5, although that was stronger than expectations of 86.8.
German Q2 GDP was revised upward to +0.1% q/q and +1.8% y/y from the previously reported unchanged q/q and +1.5% y/y.
USD/JPY (^USDJPY) on Thursday fell by -0.46%. A decline in T-note yields Thursday gave the yen a boost. Also, short-covering in the yen pushed prices higher ahead of Fed Chair Powell’s speech Friday at the Fed’s annual symposium at Jackson Hole, Wyoming.
Japanese economic news Thursday supported the yen after Japan July PPI services prices rose +2.1% y/y, unchanged from June and weaker than expectations of an increase of +2.2% y/y.
October gold (GCV22) Thursday closed up +9.80 (+0.56%), and September silver (SIU22) closed up +0.213 (+1.13%). Gold and silver prices Thursday posted moderate gains due to a weak dollar. Gold also found support Thursday on lower global bond yields. Silver also garnered support Thursday after the U.S and German Q2 GDP reports were revised higher.
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