The dollar index (DXY00) on Friday rose by +0.56%. The dollar Friday recovered from an 11-1/2 month low and moved moderately higher. A jump in the 10-year T-note yield to a 1-1/2 week high Friday sparked short covering in the dollar. Gains in the dollar accelerated Friday on hawkish comments from Fed Governor Waller, who said the Fed needs to keep raising interest rates. The market shows an 81% chance the Fed will raise the federal funds target range by 25 bp at the May 2-3 FOMC meeting.
Friday’s U.S. economic news was mixed for the dollar. Mar retail sales fell -1.0% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 4 months. However, Mar core retail sales (ex-autos and gasoline) fell -0.3% m/m, a smaller decline than expectations of -0.6% m/m. Mar manufacturing production fell -0.5% m/m, weaker than expectations of -0.1% m/m. The University of Michigan U.S. Apr consumer sentiment rose +1.5 to 63.5, stronger than expectations of 62.1.
Fed comments Friday were hawkish and bullish for the dollar. Fed Governor Waller said, "Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further." Also, Atlanta Fed President Bostic said recent inflation data are consistent with the Fed "moving one more time" with a 25 bp rate hike and then holding.
EUR/USD (^EURUSD) on Friday fell by -0.46%. The euro Friday fell back from a 1-year high today and moved moderately lower. A rebound in the dollar Friday sparked long liquidation in EUR/USD. The euro initially moved higher Friday after the 10-year German bund yield climbed to a 1-month high on hawkish comments from ECB President Lagarde, who said “underlying inflationary pressures remain strong."
The German Mar wholesale price index eased to +2.0% y/y from +8.9% y/y in Feb, the slowest pace of increase in more than 2 years.
ECB President Lagarde said, "Resilient labor markets and strong wage growth, especially in advanced economies, suggest that underlying inflationary pressures remain strong."
USD/JPY (^USDJPY) on Friday rose by +0.90%. The yen Friday gave up overnight gains and turned lower after hawkish Fed comments pushed the 10-year T-note yield up to a 1-1/2 week high. The yen was also undercut after BOJ Governor Ueda said the BOJ would maintain monetary easing to reach its CPI goal.
June gold (GCM3) on Friday closed down -39.50 (-1.92%), and May silver (SIK23) closed down -0.465 (-1.79%). Precious metals retreated Friday after the dollar index recovered from an 11-1/2 month low and moved higher. Metals were also undercut Friday by higher global bond yields. In addition, hawkish comments Friday from Fed Governor Waller weighed on gold prices when he said the Fed needs to keep raising interest rates. However, gold has support on strong demand from fund buying as gold holdings in exchange-traded funds (ETFs) rose to a 2-1/2 month high Thursday.
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.
