The dollar index (DXY00) on Friday rose by +0.38%. The dollar Friday rose moderately on some month-end and quarter-end buying. However, dollar gains were limited after Friday’s economic news showed U.S. price pressures receding after the Feb core PCE deflator rose less than expected, which is dovish for Fed policy.
Friday’s U.S. economic data was mixed for the dollar. On the bullish side, Feb personal income rose +0.3% m/m, stronger than expectations of +0.2% m/m. Also, the Mar MNI Chicago PMI unexpectedly rose +0.2 to 43.8, stronger than expectations of a decline to 43.0. Conversely, the Feb PCE core deflator eased to 4.6% y/y from 4.7% y/y in Jan, the slowest pace of increase in 16 months. Also, Feb personal spending rose +0.2% m/m, weaker than expectations of +0.3% m/m. In addition, the University of Michigan U.S. Mar consumer sentiment was revised lower to 62.0 from 63.4, weaker than expectations of 63.3.
Friday’s comments from Boston Fed President Collins were slightly hawkish and supportive for the dollar when she said the Fed still has "more work to do" to bring inflation down and that Fed projections this month were a good measure of what she expects for interest rates and the economy, suggesting she favors one more 25 bp Fed rate hike.
EUR/USD (^EURUSD) on Friday fell by -0.54%. The euro Friday moved lower on dollar strength. Also, today’s Eurozone economic news weighed on EUR/USD after Eurozone Mar CPI rose less than expected, German Feb retail sales unexpectedly declined, and German Mar unemployment rose more than expected. However, losses in the euro were contained after Eurozone Mar core CPI rose at a record pace, which is hawkish for ECB policy.
ECB Governing Council member Kazaks said Eurozone "inflation still remains high and continued rate increases will be necessary in order to bring inflation down."
Eurozone Mar CPI eased to +6.9% y/y from +8.5% y/y, better than expectations of +7.1% y/y and the slowest pace of increase in 13 months. Mar core CPI rose to a record +5.7% y/y from +5.6% y/y in Feb, right on expectations.
German Mar unemployment rose by +16,000, showing a weaker labor market than expectations of +1,000. Also, the Mar unemployment rate rose +0.1to 5.6%, showing a weaker labor market than expectations of no change at 5.5%.
German Feb retail sales unexpectedly fell -1.3% m/m, weaker than expectations of +0.5% m/m.
The German Feb import price index eased to +2.8% y/y from +6.6% y/y in Jan, weaker than expectations of +4.2% y/y and the slowest pace of increase in 2 years.
USD/JPY (^USDJPY) on Friday rose by +0.05%. The yen Friday fell to a 2-week low against the dollar. A rally in the Nikkei Stock Index Friday to a 3-week high reduced the safe-haven demand for the yen. The yen also fell back after Friday’s economic news showed the Mar Tokyo CPI eased and the Japan Feb jobless rate unexpectedly rose; both are dovish for BOJ policy. However, the yen recouped most of its losses as T-note yields declined.
April gold (GCJ3) on Friday closed down -11.30 (-0.57%), and May silver (SIK23) closed up +0.167 (+0.70%). Precious metals Friday settled mixed, with silver posting a 1-3/4 month high. Precious metals garnered support from Friday’s economic news that showed the U.S. Feb core PCE deflator, the Fed’s preferred inflation gauge, rose less than expected, raising hopes that Fed rate hikes may be close to ending. Silver also rose after economic news showed that China’s manufacturing and service sector activity rose more than expected this month, which supports economic growth and industrial metals demand. In addition, fund buying of gold continues as gold holdings in exchange-traded funds (ETFs) rose to a 2-month high Thursday. However, metals prices Friday fell back from their best levels, with gold falling into negative territory after the dollar rallied.
