The dollar index (DXY00) on Thursday rose slightly by +0.03%. The dollar Thursday erased overnight losses and turned slightly higher after US weekly initial unemployment claims fell more than expected, which pushed T-note yields higher and was hawkish for Fed policy. The dollar gave up most of its advance on Thursday after a rally in stocks curbed liquidity demand for the dollar.
US weekly initial unemployment claims fell -17,000 to 233,000, showing a stronger labor market than expectations of 240,000. Weekly continuing claims rose +6,000 to a 3-1/2 year high of 1.875 million, right on expectations.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 62% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) Thursday fell by -0.05% on dollar strength. Also, a jump in European nat-gas prices to an 8-month high Thursday may weigh on Eurozone economic prospects, a negative factor for the euro.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 99% for the September 12 meeting.
USD/JPY (^USDJPY) Thursday rose by +0.35%. The yen on Thursday gave up an overnight advance and turned lower after T-note yields jumped when US weekly jobless claims fell more than expected. Thursday’s summary of opinions from the July 31 BOJ meeting was also bearish for the yen after BOJ policymakers expected monetary policy to remain accommodative even after they raised interest rates.
The Japan July eco-watchers survey outlook rose +0.4 to 48.3, weaker than expectations of 48.5.
A summary of opinions from the BOJ's July 31 policy meeting showed officials expected monetary policy to remain accommodative even after they raised interest rates last week, suggesting they didn't expect the move to be big enough to disrupt global financial markets.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and +14% for the October 30-31 meeting.
December gold (GCZ24) Thursday closed up +30.90 (+1.27%), and September silver (SIU24) closed up +0.662 (+2.46%). Precious metals Thursday posted moderate gains on underlying support from geopolitical risks in the Middle East after Iran’s leader Ayatollah Ali Khamenei recently ordered a strike on Israel in response to the assassination of a Hamas political leader in Tehran. Also, fund demand for gold is supportive for prices after long gold positions in ETFs rose to a 5-1/2 month high on Wednesday.
Gains in metals Thursday were limited by a stronger dollar. Also, higher T-note yields Thursday were bearish for precious metals. In addition, a rebound in stocks Thursday reduced safe-haven demand for precious metals. Silver prices were undercut by concern about weak industrial metals demand in China after LME copper inventories on Wednesday climbed to a nearly 5-year high of 294,750 MT, a sign of weak demand.
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.
