The dollar index (DXY00) on Thursday rose by +0.57%. The dollar on Thursday rallied to a 1-week high as weakness in stocks boosted liquidity demand for the dollar. The dollar is also finding support as a safe haven from the turmoil in the banking sector after PacWest Bancorp plunged when it said deposits fell last week.
The U.S. Apr final-demand PPI eased to a 2-year low of +2.3% y/y from +2.7% in March, weaker than expectations of +2.5% y/y. The Apr PPI ex-food and energy eased to a 2-year low of +3.2% y/y from +3.4% y/y in March, weaker than expectations of +3.3% y/y.
U.S. weekly initial unemployment claims rose +22,000 to a 1-1/2 year high of 264,000, showing a weaker labor market than expectations of 245,000.
EUR/USD (^EURUSD) on Thursday fell by -0.57% and posted a 1-month low. A rally in the dollar Thursday undercut the euro. The euro was also undercut by concern about the Eurozone economy after the ECB’s monthly survey showed consumer expectations for Eurozone inflation "rose significantly in March.
The ECB said consumer expectations for Eurozone inflation "rose significantly in March. Expectations for inflation in the next 12 months increased to 5.0% from 4.6% in February, and inflation expectations for three years ahead climbed to 2.9% from 2.4% in February.
USD/JPY (^USDJPY) on Thursday rose by +0.14%. The yen on Thursday was under pressure from a stronger dollar. Also, the decline in the 10-year JGB government bond yield Thursday to a 1-week low of 0.393% Thursday weakened the yen’s interest rate differentials and weighed on the yen. The yen Thursday initially moved higher on a decline in T-note yields. Also, the ongoing U.S. banking turmoil and impasse in the U.S. debt ceiling have boosted the safe-haven demand for the yen.
Thursday’s economic news was bullish for the yen after the Japan Apr eco watchers survey outlook rose +1.6 to a 1-1/2 year high of 55.7, stronger than expectations of 55.1.
June gold (GCM3) on Thursday closed down -16.60 (-0.81%), and July silver (SIN23) closed down -1.234 (-4.81%). Precious metals on Thursday retreated, with silver falling sharply to a 5-week low. A rally in the dollar index to a 1-week high on Thursday was bearish for metals. Also, a decline in inflation expectations has curbed demand for precious metals as an inflation hedge after the 10-year breakeven inflation rate Thursday tumbled to a 7-week low.
Silver prices were also hammered by industrial metals demand concerns after Thursday’s Chinese economic news showed a weaker Chinese economy. However, on the positive side, concern about the health of the U.S. banking system and the U.S. debt limit impasse has boosted safe-haven demand for precious metals. That has led to strong fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to a 5-month high on Wednesday.
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.
