The dollar index (DXY00) on Thursday fell by -0.33%. The dollar retreated Thursday on comments from Fed Chair Powell that suggested the Fed will keep interest rates on hold for a second consecutive meeting when the FOMC meets next on Oct 31-Nov 1. Losses in the dollar were limited after the 10-year T-note yield climbed to a 16-year high, which strengthened the dollar’s interest rate differentials. Also, weakness in stocks spurred some liquidity demand for the dollar.
Thursday’s U.S. economic news was mixed for the dollar. On the negative side, Sep existing home sales fell -2.0% m/m to a 13-year low of 3.96 million. Also, the Oct Philadelphia Fed business outlook survey rose +4.5 to -9.0, weaker than expectations of -7.0. In addition, Sep leading indicators fell -0.7% m/m, weaker than expectations of -0.4% m/m and the biggest decline in 4 months. On the positive side, weekly initial unemployment claims unexpectedly fell -13,000 to an 8-3/4 month low of 198,000, showing a stronger labor market than expectations of an increase to 210,000.
Thursday’s comments from Fed Chair Powell were slightly dovish when he said, "Given the uncertainties and risks, and how far we have come, the FOMC is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks."
EUR/USD (^EURUSD) on Thursday rose by +0.47%. The euro Thursday garnered support on comments from Fed Chair Powell that weighed on the dollar when he signaled a continued pause in Fed rate hikes and said the Fed was “proceeding carefully” when making decisions about the extent of additional policy tightening.
Thursday’s Eurozone economic news was bearish for EUR/USD after French Oct business confidence fell -2 to a 2-1/2 year low of 98, weaker than expectations of 99.
USD/JPY (^USDJPY) on Thursday fell by -0.08%. The yen on Thursday recovered from a 2-week low against the dollar and moved slightly higher. The yen found support Thursday on the BOJ’s quarterly report that showed after the BOJ upgraded its economic assessments for the most regions in Japan in more than a year, a sign of growing confidence in Japan’s recovery. Also, higher Japanese government bond yields were supportive for the yen after the 10-year JGB bond yield Thursday rose to a 10-year high of 0.851%. Gains in the yen were contained by higher T-note yields after the 10-year T-note yield climbed to a new 16-year high.
In a quarterly report Thursday, the BOJ upgraded its economic assessments for the most regions in more than a year, a sign of growing confidence in Japan’s recovery. The BOJ raised its economic view for six of nine areas in Japan and kept the other three regions unchanged.
December gold (GCZ3) on Thursday closed +12.20 (+0.62%), and Dec silver (SIZ23) closed -0.068 (-0.29%). Precious metals prices on Thursday settled mixed, with gold posting a 2-1/2 month high. A weaker dollar Thursday was bullish for metals prices. Also, concern about the Israeli-Hamas conflict has boosted the safe-haven demand for precious metals. An increase in inflation expectations boosted demand for gold as an inflation hedge after the 10-year U.S. breakeven inflation rate Thursday rose to a 7-1/2 month high. Comments from Fed Chair Powell were slightly dovish when he said the Fed will “proceed carefully” when making decisions about the extent of additional policy firming.
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.
