The dollar index (DXY00) Thursday rose by +0.04%. The dollar Thursday recovered from early losses and moved higher after T-note yields erased an early decline and moved higher. Also, weakness in the yen supported the dollar after the yen on Thursday fell to a 5-week low against the dollar. The dollar initially moved lower Thursday on the benign U.S. Jul CPI report and jump in weekly jobless claims to a 5-week high, which is dovish for Fed policy. Also, a rally in stock today has reduced the liquidity demand for the dollar.
U.S. weekly initial unemployment claims rose +21,000 to a 5-week high of 248,000, showing a weaker labor market than expectations of 230,000.
U.S July CPI rose +3.2% y/y, weaker than expectations of +3.3% y/y. Jul CPI ex-food and energy eased to +4.7% y/y from +4.8% y/y in Jun, right on expectations.
Thursday’s comments from San Francisco Fed President Daly were slightly hawkish and supportive for the dollar when she said the Fed has more work to do to control inflation even after today's July CPI report "came in largely as expected." She added that the Fed is "a long way" from talking about too-restrictive interest rates.
EUR/USD (^EURUSD) Thursday rose by +0.10% and posted a 2-week high. Weakness in the yen was bullish for the euro as EUR/JPY Thursday soared to a nearly 15-year high on central bank divergence, with the BOJ maintaining QE and record low-interest rates while the ECB is in the midst of a rate hiking cycle. EUR/USD fell back from its best levels after the dollar recovered from early losses and moved higher.
USD/JPY (^USDJPY) on Thursday rose by +0.71%. The yen Thursday retreated for the fourth consecutive session and fell to a 5-week low against the dollar. Central bank divergence continues to weigh on the yen, with the Fed and ECB raising interest rates while the BOJ maintains record-low interest rates. An easing of Japanese producer price pressures is also dovish for BOJ policy and weighed on the yen after Japan's Jul PPI rose +3.6% y/y, the slowest pace of increase in 2-1/4 years. Losses in the yen accelerated after T-note yields recovered from early losses and moved higher.
Japan's Jul PPI eased to +3.6% y/y from +4.3% y/y in Jun, the slowest pace of increase in 2-1/4 years.
October gold (GCV3) Thursday closed down -1.5 (-0.08%), and Sep silver (SIU23) closed up +0.090 (+0.40%). Precious metals prices Thursday gave up early gains and settled mixed. A recovery in the dollar Thursday from early losses to moderate gains sparked long liquidation in precious metals. Also, higher T-note yields on Thursday undercut precious metals prices. In addition, fund liquidation in gold continues after long gold holdings in ETFs fell to a 3-1/3 year low on Wednesday. Precious metals Thursday initially moved higher on the weaker-than-expected U.S. Jul CPI report, which may prompt the Fed to pause its rate hike campaign.
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.
