The dollar index (DXY00) on Wednesday rose by +0.31%. U.S. economic concerns Wednesday fueled safe-haven demand for the dollar after reports on Mar ADP employment and Mar ISM services disappointed. The dollar also garnered support on comments from Cleveland Fed President Mester, who said to put inflation on a steady path down to 2%, monetary policy needs to move "somewhat further into restrictive territory this year.” However, gains in the dollar were limited after the 10-year T-note yields fell to a 6-3/4 month low.
Wednesday’s U.S. economic data was bearish for the dollar. The Feb trade deficit expanded to -$70.5 billion, wider than expectations of -$68.8 billion and the most in 4 months, which has negative implications for Q1 GDP. Also, the Mar ADP employment change rose+145,000, weaker than expectations of +210,000. In addition, the Mar ISM services index fell -3.9 to 51.2, weaker than expectations of 54.4.
Cleveland Fed President Mester said to put inflation on a steady path down to 2%, monetary policy needs to move "somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time."
EUR/USD (^EURUSD) on Wednesday fell by -0.44%. A stronger dollar Wednesday weighed on the euro. Also, the euro was under pressure after the Eurozone Mar S&P composite PMI was revised lower. However, losses in EUR/USD were contained after German Feb factory orders rose more than expected and after Eurozone Governing Council member Vujcic said "further interest rate hikes" can be expected if core inflation in the Eurozone remains above 4%.
The Eurozone Mar S&P composite PMI was revised downward by -0.4 to 53.7 from the initially reported 54.1.
German Feb factory orders rose +4.8% m/m, stronger than expectations of +0.3% m/m and the largest increase in more than 1-1/2 years.
USD/JPY (^USDJPY) on Wednesday fell by -0.39%. The yen moved higher Wednesday for the third consecutive session and posted a 1-week high. A sharp drop in T-note yields Wednesday on weaker-than-expected U.S. economic news was bullish for the yen. Also, the yen rose after Wednesday’s Japanese economic news showed activity in Japan’s service sector expanded at the fastest pace in more than nine years.
The Japan Mar Jibun Bank services PMI was revised upward by +0.8 to 55.0 from the initially reported 54.2, the fastest pace of expansion in 9-1/4 years.
June gold (GCM3) on Wednesday closed down -2.60 (-0.13%), and May silver (SIK23) closed down -0.064 (-0.25%). Precious metals on Wednesday posted modest losses. Gold prices Wednesday gave an early advance and fell back from a 13-month high after strength in the dollar sparked long liquidation in gold. Gold prices Wednesday initially moved higher after the 10-year T-note yield tumbled to a 6-3/4 month low. Also, Wednesday’s weaker-than-expected reports on Mar ADP employment and Mar ISM services signal weakness in the U.S. economy that diminishes the chances of the Fed further increasing interest rates. However, the weak economic reports also sparked industrial metals demand concerns and undercut silver prices. A fall in copper prices on Wednesday to a 2-week low also weighed on silver prices.
