The dollar index (DXY00) Friday rose +0.58%. The dollar Friday recovered from early losses and moved higher as T-note yields rose on the stronger-than-expected U.S. Aug ISM manufacturing index. Also, hawkish comments Friday from Cleveland Fed President Mester supported the dollar. The dollar Friday initially moved lower after the U.S. Aug unemployment rate unexpectedly rose to a 1-1/2 year high.
U.S. Aug nonfarm payrolls rose +187,000, stronger than expectations of +170,000. However, the Aug unemployment rate unexpectedly rose +0.3 to a 1-1/2 year high of 3.8%, showing a weaker labor market than expectations of no change at 3.5%. Aug average hourly earnings eased to +4.3% y/y from +4.4% y/y in July, right on expectations.
The U.S. Aug ISM manufacturing index rose +1.2 to a 6-month high of 47.6, stronger than expectations of 47.0.
U.S. July construction spending rose +0.7% m/m, stronger than expectations of +0.5% m/m.
Friday’s hawkish comments from Cleveland Fed President Mester supported the dollar when she said U.S. inflation remains "too high" despite recent improvements, and the labor market is still strong.
EUR/USD (^EURUSD) Friday fell -0.62%. A stronger dollar on Friday weighed on the euro. Also, Friday’s Eurozone economic news undercut EUR/USD after the Eurozone Aug S&P manufacturing PMI was revised lower, and Italian July producer prices fell by the most on record, a dovish factor for ECB policy.
ECB Governing Council member Villeroy said we are close or very close to an interest rate peak, and keeping rates high for long enough matters more.
The Eurozone Aug S&P manufacturing PMI was revised lower by -0.2 to 43.5 from the initially reported 43.7.
Italy's July PPI eased to -13.8% y/y from -8.2% y/y in June, the fastest pace of decline since the data began in 2001.
USD/JPY (^USDJPY) Friday rose +0.43%. The yen retreated from a 3-week high against the dollar Friday and turned lower after the stronger-than-expected Aug ISM manufacturing report pushed T-note yields higher. The yen was also under pressure from weaker-than-expected Japanese capital spending and manufacturing activity reports.
Japan Q2 company profits unexpectedly rose +11.6% y/y, stronger than expectations of a -0.1% y/y decline.
Japan Q2 capital spending rose +4.5% y/y, weaker than expectations of +8.3% y/y. Q2 capital spending ex-software rose +4.4% y/y, weaker than expectations of +7.5% y/y.
The Japan Aug Jibun bank manufacturing PMI was revised lower by -0.1 to 49.6 from the initially reported 49.7.
October gold (GCV3) Friday closed +1.40 (+0.07%), and December silver (SIZ23) closed -0.250 (-1.01%). Precious metals prices Friday settled mixed, with gold posting a 3-1/2 week high. Gold found support Friday from the U.S. Aug payroll report that showed the unemployment rate unexpectedly rose to a 1-1/2 year high, a dovish factor for Fed policy. Silver also garnered carryover support from a rally in copper prices to a 4-week high Friday on stronger-than-expected manufacturing news in China and the U.S., a sign of strength for industrial metals demand. However, metals prices fell back from their best levels, with silver falling into negative territory after the dollar index rallied. Also, higher T-note yields on Friday undercut precious metals prices.
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.
