The dollar index (DXY00) Thursday rose by +0.15%. The dollar on Thursday recovered from early losses and rallied to a 1-week high after better-than-expected US economic reports bolstered the outlook for the Fed to delay interest rate cuts further. Weekly US jobless claims fell more than expected and the May S&P manufacturing PMI unexpectedly increased, which are hawkish factors for Fed policy. The dollar extended its advance Thursday afternoon when stocks gave up an early rally and turned lower, sparking liquidity demand for the dollar.
The US Apr Chicago Fed national activity index fell -0.19 to -0.23, weaker than expectations of +0.13.
US weekly initial unemployment claims fell -8,00 to 215,000, showing a stronger labor market than expectations of 220,000.
The US May S&P manufacturing PMI unexpectedly rose +0.9 to 50.9, stronger than expectations of a decline to 49.9.
US Apr new home sales fell -4.7% m/m to 634,000, weaker than expectations of 678,000.
The US May Kansas City Fed manufacturing activity survey rose 6 to a 5-month high of -2, stronger than expectations of -7.
The markets are discounting the chances for a -25 bp rate cut at 0% for the June 11-12 FOMC meeting and 10% for the following meeting on July 30-31.
EUR/USD (^EURUSD) Thursday fell by -0.14%. The euro on Thursday gave up an early advance and dropped to a 1-week low after the dollar recovered from losses and rallied to a 1-week high. The euro initially moved higher Thursday, based on stronger-than-expected reports on Eurozone Q1 wages and the Eurozone May S&P manufacturing PMI.
The Eurozone May consumer confidence index rose +0.4 to a 2-1/4 year high of -14.3, slightly weaker than expectations of -14.2.
Wage pressures are hawkish for ECB policy and supportive for the euro after the ECB reported that Eurozone negotiated wages in Q1 increased +4.7% y/y from +4.5% y/y in Q4 and matched a record.
The Eurozone May S&P manufacturing PMI rose +1.7 to a 15-month high of 47.4, stronger than expectations of 46.1. The May S&P composite PMI rose +0.6 to 52.3, stronger than expectations of 52.0 and the fastest pace of expansion in a year.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 91% for its next meeting on June 6.
USD/JPY (^USDJPY) on Thursday rose by +0.05%. The yen on Thursday gave up an early advance and fell to a 3-week low against the dollar after the 10-year T-note yield jumped to a 1-week high. The yen Thursday initially posted modest gains on stronger-than-expected Japanese economic reports on May Jibun Bank manufacturing PMI and Apr machine tool orders.
Japan Apr machine tool orders were revised upward to -8.9% y/y from the previously reported -11.6% y/y.
The Japan May Jibun Bank manufacturing PMI rose +0.9 to 50.5, the fastest pace of expansion in a year.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 28% for the June 14 meeting.
June gold (GCM4) Thursday closed down -55.7 (-2.33%), and July silver (SIN24) closed down -1.041 (-3.31%). Precious metals prices Thursday sold off sharply, with gold sliding to a 2-week low. Negative carryover from Wednesday afternoon’s hawkish minutes of the April 30-May 1 FOMC meeting undercut precious metals prices Thursday as the minutes stated that policymakers favored keeping interest rates higher for longer to combat inflation. Also, higher global bond yields Thursday pressured precious metals prices. Losses in gold accelerated Thursday after the dollar recovered from early losses and rallied to a 1-week high.
On the positive side for metals Thursday were signs of wage pressures in Europe that increased demand for gold as an inflation hedge after the ECB reported Eurozone negotiated wages in Q1 increased +4.7% y/y from +4.5% y/y in Q4 and matched a record. Silver found some support Thursday on the stronger-than-expected May manufacturing PMIs in the US, Eurozone, and Japan, a positive factor for 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.
