The dollar index (DXY00) on Thursday rose by +0.24%. The dollar on Thursday recovered from a 5-month low and posted moderate gains. Higher T-note yields Thursday sparked short covering in the dollar. The dollar Thursday initially moved lower on strength in the yen, which rallied to a 5-month high on hawkish BOJ comments. Also, expectations for the Fed to begin cutting interest rates in 2024 weighed on the dollar.
U.S. economic news Thursday was dovish for Fed policy and bearish for the dollar. Weekly initial unemployment claims rose +12,000 to 218,000, showing a weaker labor market than expectations of an increase to 210,000. Also, Nov pending home sales were unchanged m/m, weaker than expectations of +0.9% m/m.
The markets are discounting the chances for a -25 bp rate cut at 16% for the next FOMC meeting on Jan 30-31 and have fully discounted (101%) the chance for that -25 bp rate cut for the following meeting on March 19-20.
EUR/USD (^EURUSD) on Thursday fell by -0.35%. The euro Thursday fell back from a 5-month high and finished moderately lower. A rebound in the dollar Thursday sparked long liquidation pressures in the euro. EUR/USD on Thursday initially moved higher on hawkish comments from ECB Governing Council member Holzmann, who said it's "too early" for the ECB to think about interest rate cuts now.
ECB Governing Council member Holzmann said it's "too early" for the ECB to think about interest rate cuts now, and "there's no guarantee for rate cuts in 2024."
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 6% for its next meeting on Jan 25 and at 71% for the following meeting on March 7.
USD/JPY (^USDJPY) on Thursday fell by -0.30%. The yen on Thursday rallied to a 5-month high against the dollar. The yen found support Thursday on hawkish comments from BOJ Governor Ueda that suggest he is preparing the markets for a rate hike in the spring. Ueda said it was possible the BOJ could move to exit its negative rate policy at its April policy meeting after assessing annual pay deal figures due in March. Also, positive Japanese economic news Thursday on industrial production and retail sales are bullish for the yen. The yen fell back from its best levels as T-note yields rose.
Japan Nov industrial production fell -0.9% m/m, a smaller decline than expectations of -1.6% m/m.
Japan Nov retail sales rose +1.0% m/m, stronger than expectations of +0.5% m/m.
February gold (GCG4) Thursday closed -9.60 (-0.46%), and Mar silver (SIH24) closed -0.269 (-1.09%). Gold and silver on Thursday closed moderately lower. A recovery in the dollar Thursday weighed on metals prices as the dollar index rebounded from a 5-month low and moved higher. Also, higher global bond yields Thursday undercut previous metals. Gold prices also came under pressure on hawkish comments from ECB Governing Council member Holzmann, who said it's "too early" for the ECB to think about interest rate cuts now.
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.
