The dollar index (DXY00) on Friday rose by +0.42%. The dollar Friday recovered from a 1-week low and posted moderate gains as T-note yields jumped on the larger-than-expected increase in U.S. May nonfarm payrolls. The dollar Friday initially fell to a 1-week low after the Senate Thursday night passed the bill lifting the debt limit, which sparked a rally in stocks that curbed the liquidity demand for the dollar.
Friday’s U.S. May payroll report was better than expected and bullish for the dollar. May nonfarm payrolls rose +339,000, stronger than expectations of +195,000 and the largest increase in 4 months. Also, Apr was revised higher to +294,000 from the initially reported +253,000. The May unemployment rate rose +0.3 to 3.7%, above expectations of 3.5%.
U.S. May average hourly earnings eased to +4.3% y/y from +4.4% in Apr, better than expectations of no change at 4.4%.
EUR/USD (^EURUSD) on Friday fell by -0.46%. The euro Friday fell back from a 1-week high and posted moderate losses after the dollar rallied on the better-than-expected U.S. May payroll report. EUR/USD Friday initially climbed to a 1-week high on hawkish comments from ECB Governing Council members Vasle and Makhlouf, who said more ECB rate hikes are needed to tame inflation.
French Apr manufacturing production rose +0.7% m/m, stronger than expectations of +0.1% m/m.
ECB Governing Council member Vasle said "further ECB interest rate hikes are needed" to tame inflation and reach our 2% goal as "core inflation remains high and persistent."
ECB Governing Council member Makhlouf said the ECB will likely raise interest rates in June and July as "we need to see and be confident that we're seeing inflation actually on a trajectory that it's going to achieve our 2% target."
USD/JPY (^USDJPY) on Friday rose by +0.83%. The yen was under pressure Friday on dovish comments from BOJ Governor Ueda as he signaled the BOJ would maintain stimulus measures when he said “it will take some time” to reach the BOJ’s 2% price goal. The yen was also weighed down Friday by higher T-note yields. In addition, a rally in global equity markets on Friday has reduced the safe-haven demand for the yen.
August gold (GCQ3) on Friday closed down -25.90 (-1.30%), and July silver (SIN23) closed down -0.240 (-1.00%). Precious metals Friday closed moderately lower. A stronger dollar on Friday weighed on metals prices. Also, the action by Congress to pass legislation to raise the debt ceiling Thursday night has sparked a rally in stocks that are reducing safe-haven demand for precious metals. In addition, higher global bond yields Friday undercut metals prices. The downside in silver was limited on carryover support from a rally in copper prices to a 3-week high Friday on signs that China may boost stimulus measures to revive its property market, which is supportive of industrial metals demand.
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.
