The dollar index (DXY00) Thursday fell back from a 3-1/2 week high and posted a slight loss. Long liquidation emerged in the dollar after stocks recovered from their worst levels, which curbed liquidity demand for the dollar. The dollar on Thursday initially moved higher on the rise in the 10-year T-note yield to an 8-3/4 month high of 4.196%.
Thursday’s U.S. economic news was mixed for the dollar. On the bearish side, weekly initial unemployment claims rose +6,000 to 227,000, showing a slightly weaker labor market than expectations of 225,000. Also, the Jul U.S. ISM services index fell -1.2 to 52.7, weaker than expectations of 53.1. On the bullish side, Q2 nonfarm productivity rose +3.7%, better than expectations of +2.2% and the largest increase since Q3 2020. Also, Jun factory orders rose +2.3% m/m, right on expectations and the most in nearly 2-1/2 years.
Positive comments from Richmond Fed President Barkin were supportive for the dollar when he said the greater-than-expected easing in inflation in June might be an indication the U.S. economy can have a "soft landing," returning to price stability without a damaging recession.
EUR/USD (^EURUSD) Thursday recovered from a 3-1/2 week low and moved slightly higher. Dollar weakness Thursday sparked short covering in the euro. EUR/USD Thursday initially moved lower on weaker-than-expected Eurozone PPI and PMI reports that were dovish for ECB policy.
Eurozone Jun PPI fell -0.4% m/m and -3.4% y/y, weaker than expectations of -0.3% m/m and -3.2% y/y, with the -3.4% y/y drop, the largest decline in 3 years.
The Eurozone Jul S&P composite PMI was revised downward by -0.3 to 48.6 from the previously reported 48.9, the steepest pace of contraction in 8 months.
German trade data was weaker than expected as Jun exports rose +0.1% m/m, weaker than expectations of +0.3% m/m. Also, Jun imports fell -3.4% m/m, weaker than expectations of -0.3% m/m.
ECB Executive Board member Panetta said it's "too early" to commit to what the ECB will do in September. However, "should the inflation outlook materially deteriorate, a further rate adjustment would be warranted."
USD/JPY (^USDJPY) on Thursday fell by -0.45%. The yen Thursday recovered from a 3-1/2 week low and rose moderately. A -1.68% decline in the Nikkei Stock Index Thursday boosted some safe-haven demand for the yen. Also, Thursday’s jump in the 10-year Japanese JGB bond yield to a 9-year high of 0.659% strengthened the yen’s interest rate differentials. The yen maintained moderate gains despite higher T-note yields Thursday. The yen Thursday initially dropped to a 3-1/2 week low against the dollar after the BOJ announced an unscheduled debt-purchase operation for the second time this week in an attempt to push bond yields lower. The BOJ said it would buy 100 billion yen of 3-year to 5-year bonds and 300 billion yen of 5-year to 10-year bonds.
The Japan Jul Jibun Bank services PMI was revised downward by -0.1 to 53.8 from the initially reported 53.9.
October gold (GCV3) Thursday closed down -6.1 (-0.31%), and Sep silver (SIU23) closed down -0.175 (-0.73%). Precious metals prices Thursday posted moderate losses, with gold and silver falling to 3-week lows. Higher global bond yields Thursday weighed on precious metals prices. Gold prices were also under pressure from fund liquidation after long gold holdings in ETFs fell to a new 3-year low on Wednesday. Metal prices recovered from their worst levels after the dollar index fell back from a 3-1/2 week high and turned lower.
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.
