The dollar index (DXY00) Thursday fell by -0.41%. The dollar was under pressure after the Chinese yuan rose to a 16-month high against the dollar after the government boosted stimulus measures. Also, Thursday’s rally in stocks curbed liquidity demand for the dollar. Losses in the dollar were limited due to Thursday's stronger-than-expected US weekly jobless claims and Q2 GDP reports, hawkish factors for Fed policy that pushed T-note yields higher.
US weekly initial unemployment claims unexpectedly fell -4,000 to a 4-month low of 218,000, showing a stronger labor market than expectations of an increase to 223,000.
US Q2 GDP was left unrevised at +3.0% (q/q annualized), stronger than expectations of a downward revision to +2.9%.
US Aug capital goods new orders nondefense ex-aircraft and parts rose +0.1% m/m, right on expectations.
US Aug pending home sales rose +0.6% m/m, weaker than expectations of +1.0% m/m.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and a 51% chance for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) Thursday rose by +0.45%. The euro found support Thursday from a weaker dollar. Also, an unexpected increase in the German Oct GfK consumer confidence index was bullish for the euro. A bearish factor for the euro was Thursday’s report on the Eurozone Aug M3 money supply, which rose more than expected at the fastest pace in 19 months.
Eurozone Aug M3 money supply rose +2.9% y/y, stronger than expectations of +2.5% y/y and the largest increase in 19 months.
The German Oct GfK consumer confidence index unexpectedly rose +0.7 to -21.2, stronger than expectations of a decline to -22.5.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 61% for the October 17 meeting and 100% for that -25 bp rate cut at the December 12 meeting.
USD/JPY (^USDJPY) Thursday fell by -0.14%. The yen recovered from a 3-week low against the dollar Thursday and posted moderate gains due to the hawkish minutes of the BOJ’s July 30-31 policy meeting. The yen on Thursday initially moved lower, based on expectations that Sanae Takaichi would be elected Liberal Democratic Party leader on Friday. Takaichi, who is likely to become Japan's next prime minister, said earlier this week that "it's stupid to raise interest rates now." Also, Thursday’s sharp +2% rally in the Nikkei Stock Index to a 3-week high reduced safe-haven demand for the yen.
According to the minutes of the July 30-31 BOJ meeting, a BOJ policymaker said it would be necessary for the BOJ to proceed with further adjustment of easing if it was confirmed that inflation is developing in line with BOJ expectations.
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.
