The dollar index (DXY00) on Thursday rose by +0.08%. The dollar recovered from overnight losses on Thursday and turned higher after weekly US jobless claims rose less than expected, a sign of labor market strength. The dollar extended its gains after a stock market slump boosted liquidity demand for the currency.
The dollar initially moved lower on Thursday amid a stronger yuan, which rallied to a 2.75-year high. Dovish comments from Chicago Fed President Alan Goolsbee also weighed on the dollar, as he said interest rates could come down further this year if inflation does.
US weekly initial unemployment claims rose by +4,000 to 212,000, showing a stronger labor market than expectations of 216,000.
Chicago Fed President Alan Goolsbee said the US economy has been solid, and the job market has been stable, and that interest rates can come down further this year if inflation does.
Swaps markets are discounting the odds at 3% for a -25 bp rate cut at the next policy meeting on March 17-18.
The dollar continues to see underlying weakness as the FOMC is expected to cut interest rates by about -50 bp in 2026, while the BOJ is expected to raise rates by another +25 bp in 2026, and the ECB is expected to leave rates unchanged in 2026.
EUR/USD (^EURUSD) on Thursday fell by -0.10%. The euro was under pressure Thursday from a stronger dollar. The euro also slipped after the Eurozone Feb economic confidence indicator unexpectedly declined. In addition, the Eurozone Jan M3 money supply rose by more than expected, the most in 6 months, a negative factor for the euro.
The Eurozone Feb economic confidence indicator unexpectedly fell -1.0 to 98.3, weaker than expectations of an increase to 99.8.
Eurozone Jan M3 money supply rose +3.3% y/y, stronger than expectations of +2.9% y/y and the largest increase in 6 months.
Swaps are discounting a 3% chance of a -25 bp rate cut by the ECB at its next policy meeting on March 19.
USD/JPY (^USDJPY) on Thursday fell by -0.17%. The yen moved higher on Thursday amid hawkish comments from BOJ Board member Hajime Takata, who signaled his support for additional BOJ interest rate increases. Also, Thursday's upward revision to the Dec leading index CI to a 19-month high is bullish for the yen. Gains in the yen were limited after the Nikkei Stock Index rallied to a new record high on Thursday, diminishing safe-haven demand for the yen.
The Japan Dec leading index CI was revised upward by +0.8 to a 19-month high of 111.0 from the previously reported 110.2.
BOJ Board member Hajime Takata is pushing for additional BOJ interest rate increases, describing Japan's inflation trend as "heated to the core."
The markets are discounting a +9% chance of a BOJ rate hike at the next meeting on March 19.
April COMEX gold (GCJ26) on Thursday closed down by -32.00 (-0.61%), and March COMEX silver (SIH26) closed down -3.990 (-4.39%).
Gold and silver prices retreated on Thursday. Dollar strength on Thursday weighed on metals prices. Also, signs of easing US-Iranian tensions are curbing safe-haven demand for precious metals today, after the foreign minister of Oman, who is mediating the nuclear discussions between the US and Iran, said the US and Iran will continue nuclear talks at a technical level next week after making "significant progress" in Switzerland. Also, comments on Thursday from BOJ Board member Hajime Takata sparked long liquidation in precious metals when he said he favors additional interest rate increases from the BOJ.
Precious metals also have support amid uncertainty over US tariffs and geopolitical risks in Iran, Ukraine, the Middle East, and Venezuela. In addition, US political uncertainty, large US deficits, and uncertainty regarding government policies are prompting investors to cut holdings of dollar assets and shift into precious metals.
Strong central bank demand for gold is also supportive of prices, following the recent news that bullion held in China's PBOC reserves rose by +40,000 ounces to 74.19 million troy ounces in January, the fifteenth consecutive month the PBOC has boosted its gold reserves.
Finally, increased liquidity in the financial system is boosting demand for precious metals as a store of value, following the FOMC's December 10 announcement of a $40 billion-per-month liquidity injection into the US financial system.
Gold and silver plunged from record highs on January 30 when President Trump announced he had nominated Keven Warsh as the new Fed Chair, which fueled massive liquidation of long positions in precious metals. Mr. Warsh is one of the more hawkish candidates for Fed Chair and is seen as less supportive of deep interest rate cuts. Also, recent volatility in precious metals prices has prompted trading exchanges worldwide to raise margin requirements for gold and silver, leading to the liquidation of long positions.
Fund demand for precious metals remains strong, with long holdings in gold ETFs climbing to a 3.5-year high on Wednesday. Also, long holdings in silver ETFs rose to a 3.5-year high on December 23, though liquidation has since knocked them down to a 3.25-month low on Monday.
