The dollar index (DXY00) on Friday fell by -0.08%. The dollar Friday fell back slightly as T-note yields declined, weakening the dollar’s interest rate differentials. Also, dovish comments Friday from Philadelphia Fed President Harker and Cleveland Fed President Mester undercut the dollar when they said they favored the Fed continuing its pause on rate hikes. Losses in the dollar were limited as a slide in stocks boosted the liquidity demand for the dollar.
Comments from Philadelphia Fed President Harker suggest he favors a Fed pause on rate hikes when he said the FOMC should allow policy actions taken so far to continue to work and then closely watch data before making any decisions on moving the policy rate in either direction. Also, Cleveland Fed President Mester said, "Regardless of the decision made at the next FOMC meeting, if the economy evolves as anticipated, in my view, we are likely near or at a holding point on the funds rate."
Atlanta Fed President Bostic said the U.S. economy's long-term trend is moving in a positive way, and he doesn't think the Fed will cut interest rates before the middle of 2024.
EUR/USD (^EURUSD) on Friday rose by +0.09%. The euro on Friday posted modest gains as dollar weakness sparked short covering in the euro. Signs of strength in the Eurozone economy were bullish for the euro after Eurozone Sep new car registrations rose for the fourteenth consecutive month. Gains in EUR/USD were limited after German producer prices in September fell by a record, a dovish factor for ECB policy.
Eurozone Sep new car registrations rose +9.2% y/y to 861,000, the fourteenth consecutive month registrations have increased.
German Sep PPI fell a record -14.7% y/y (data from 1977), a larger decline than expectations of -14.1% y/y.
USD/JPY (^USDJPY) on Friday rose by +0.03%. The yen on Friday dropped to a 2-1/2 week low against the dollar. The yen was under pressure on Friday’s dovish comments from BOJ Governor Ueda, who said, “The BOJ will keep monetary easing patiently to achieve its 2% inflation target in a stable and sustainable manner.” Losses in the yen were limited after Japan Sep CPI ex-fresh food and energy rose more than expected, a hawkish factor for BOJ policy, and after T-note yields declined.
Japan Sep national CPI eased to +3.0% y/y from +3.2% y/y in Aug, right on expectations. Sep national CPI ex-fresh food and energy eased to +4.2% y/y from +4.3% y/y in Aug, stronger than expectations of +4.1% y/y.
December gold (GCZ3) on Friday closed +13.90 (+0.70%), and Dec silver (SIZ23) closed +0.473 (+2.05%). Precious metals prices on Friday closed moderately higher, with gold posting a 2-3/4 month high and silver posting a 1-month high. Precious metals rallied Friday on increased safe-haven demand due to concerns that the Israeli-Hamas conflict could spread throughout the Middle East. Also, a weaker dollar and lower global bond yields Friday were bullish for metals. In addition, Friday’s slide in global equity markets sparked safe-haven buying of precious metals. On the negative side is the continued liquidation of long gold positions by funds after long gold holdings in ETFs fell to a 3-1/2 year low on Thursday.
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.
