The dollar index (DXY00) on Thursday rose by +0.67% and posted a 1-3/4 month high. The dollar Thursday moved higher on optimism that the U.S. will raise its debt ceiling. Also, Thursday’s stronger-than-expected U.S. economic reports on weekly jobless claims and the May Philadelphia Fed business outlook survey are hawkish for Fed policy. In addition, the jump in the 10-year T-note yield Thursday to a 2-month high strengthens the dollar’s interest rate differentials.
Thursday’s U.S. economic reports were primarily bullish for the dollar. U.S. weekly initial unemployment claims fell -22,000 to 242,000, showing a stronger labor market than expectations of 251,000. Also, weekly continuing claims unexpectedly fell -8,000 to 1.799 million, showing a stronger labor market than expectations of an increase to 1.820 million. In addition, the May Philadelphia Fed business outlook survey rose +20.9 to a 4-month high of -10.4, stronger than expectations of -20.0. On the negative side, Apr existing home sales fell -3.4% m/m to 4.28 million, weaker than expectations of 4.30 million.
Hawkish comments Thursday from Dallas Fed President Logan were supportive of the dollar when she said inflation is too high and the case for the Fed pausing interest rate increases at the June FOMC meeting isn't yet clear.
EUR/USD (^EURUSD) on Thursday fell by -0.66% and posted a 7-week low. Strength in the dollar Thursday undercut the euro. Also, hawkish comments Thursday from ECB Vice President Guindos bolstered concerns that the ECB will need to keep raising interest rates, which will curb economic growth in the Eurozone and is bearish for EUR/USD.
ECB Vice President Guindos said inflation in services is most worrying for the ECB, and it is too soon to say where the ECB will pause its interest rate hikes.
USD/JPY (^USDJPY) on Thursday rose by +0.75%. The yen on Thursday extended its streak to six consecutive sessions of losses and dropped to a 5-1/2 month low against the dollar. A jump in T-note yields Thursday undercut the yen. Also, Thursday’s rally in the Nikkei Stock Index to a 20-month high has curbed the safe-haven demand for the yen. In addition, Japanese trade news Thursday was weaker than expected and weighed on the yen.
Japanese trade news was weaker than expected after Japan's Apr exports rose +2.6% y/y, weaker than expectations of +3.0% y/y. Also, Apr imports fell -2.3% y/y, weaker than expectations of -0.6% y/y and the biggest decline in 2-1/4 years.
June gold (GCM3) on Thursday closed down -25.10 (-1.26%), and July silver (SIN23) closed down -0.264 (-1.10%). Precious metals on Thursday posted moderate losses, with gold falling to a 1-3/4 month low and silver dropping to a 1-1/2 month low. A rally in the dollar index Thursday to a 1-3/4 month high was bearish for metals prices. Also, optimism that U.S. lawmakers will soon agree to raise the debt ceiling has curbed the safe-haven demand for precious metals. In addition, rising global bond yields Thursday are bearish for metals. Finally, concerns about industrial metals demand pressured silver prices after Thursday’s U.S. housing news showed Apr existing home sales fell 3.4% m/m to 4.28 million, weaker than expectations of 4.30 million.
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.
