The dollar index (DXY00) on Friday recovered from a 5-week low and rose by +0.18%. Hawkish Fed comments Friday from Richmond Fed President Barkin and Fed Governor Waller pushed bond yields higher and sparked short covering in the dollar. Also, the stronger-than-expected University of Michigan U.S. Jun consumer sentiment index supported the dollar.
The University of Michigan U.S. Jun consumer sentiment index rose +4.7 to a 4-month high of 63.9, stronger than expectations of 60.0. The University of Michigan's Jun 1-year inflation expectations indicator fell to 3.3% from 4.2% in May, better than expectations of 4.1% and the lowest in 2 years. Also, the 5-10 year inflation expectations indicator fell to 3.0% from 3.1% in May, right on expectations.
Richmond Fed President Barkin said inflation is "too high and stubbornly persistent," and he's comfortable tightening monetary policy further to reduce inflation and slow a resilient U.S. economy and labor market.
Fed Governor Waller said the U.S. economy “is still ripping along for the most part,” and everything seems to be calm in the banking system now.
EUR/USD (^EURUSD) on Friday retreated from a 5-week high and fell by -0.03%. A recovery in the dollar from a 5-week low sparked long liquidation in the euro. EUR/USD Friday initially moved up to a 5-week high on hawkish comments from ECB Governing Council members Muller and Nagel both said the ECB needs to keep raising interest rates.
Eurozone Q1 labor costs eased to +5.0% y/y from +5.6% y/y in Q4.
ECB Governing Council member and Bundesbank President Nagel said, "We may need to keep raising rates after the summer break" to contain inflation.
ECB Governing Council member Muller said, "Interest rate hikes by the ECB are probably not over yet on the expectation that price increases in the Eurozone will remain clearly faster than the ECB's target of 2% for more than a year."
USD/JPY (^USDJPY) on Friday rose by +1.08%. The yen Friday tumbled to a 6-3/4 month low against the dollar after the BOJ maintained its ultra-loose monetary policy and kept its target for 10-year JGB yields unchanged. Also, BOJ Governor Ueda said Japan hasn't yet achieved sustainable and stable 2% inflation, signaling the BOJ will keep its stimulus measures in place, a bearish factor for the yen.
The BOJ, as expected, voted 9-0 to maintain the policy balance rate at -0.1% and keep the 10-year JGB yield target at about 0%.
BOJ Governor Ueda said Japan hasn't yet achieved sustainable and stable 2% inflation and that an inflation forecast of 2% may not necessarily lead to a shift in BOJ policy.
August gold (GCQ3) on Friday closed up +0.50 (+0.03%), and July silver (SIN23) closed up +0.179 (+0.75%). Precious metals Friday closed slightly higher. Metals garnered support Friday after the BOJ maintained its stimulus measures and record-low interest rates. Silver also rose on the expectations of additional stimulus measures from China, which could boost economic growth and industrial metals demand. A stronger dollar Friday and higher T-note yields limited the upside in metals prices. Gold prices were also under pressure on comments from several ECB and Fed policymakers who signaled their support for more interest rate hikes.
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.
