The dollar index (DXY00) on Friday rose by +0.18% and posted a 1-week high. The dollar found support Friday on the stronger-than-expected U.S. Q1 employment cost index report, which bolsters the case for the Fed to keep raising interest rates. The dollar also found support on weakness in the yen, which dropped to a 7-week low against the dollar after the BOJ maintained its stimulus measure and said it would patiently continue with monetary easing. However, gains in the dollar were limited Friday as stocks rallied, which curbed liquidity demand for the dollar.
Friday’s mostly stronger-than-expected U.S. economic news was supportive of the dollar. Mar personal spending was unchanged m/m, slightly stronger than expectations of -0.1% m/m. Also, Mar personal income rose +03% m/m, stronger than expectations of +0.2% m/m. In addition, the Q1 employment cost index rose +1.2% (q/q annualized), stronger than expectations of +1.1%. Finally, the MNI Apr Chicago PMI unexpectedly rose +4.8 to an 8-month high of 48.6, stronger than expectations of a decline to 43.6.
EUR/USD (^EURUSD) on Friday fell by -0.12%. A stronger dollar Friday weighed on the euro. Also, EUR/USD weakened after Eurozone Q1 GDP expanded at a slower-than-expected pace. Losses in the euro were limited after French Apr consumer prices unexpectedly accelerated, which is hawkish for ECB policy.
Eurozone Q1 GDP rose +0.1% q/q and +1.3% y/y, slightly weaker than expectations of +0.2% m/m and +1.4% y/y.
Eurozone price news Friday was mixed for the euro. French Apr CPI (EU harmonized) unexpectedly strengthened to +6.9% y/y from +6.7% y/y in Mar. However, German Apr CPI (EU harmonized) eased to +7.6% y/y from +7.8% y/y in Mar, the weakest level in 13 months.
USD/JPY (^USDJPY) on Friday rose by +1.69%. The yen Friday tumbled to a 7-week low against the dollar. The yen retreated Friday after the BOJ kept monetary policy unchanged and said it would “patiently” continue with monetary easing. Also, BOJ Governor Ueda said the Japanese economy faces a bigger risk from premature tightening than from a delay.
The BOJ voted 9-0 to maintain its policy balance rate at 0.1% and keep its 10-year JGB yield target at about 0%. The BOJ cut its 2023 Japan GDP estimate to 1.4% from a previous estimate of 1.7% and raised its 2023 core CPI estimate to 1.8% from 1.6%.
The BOJ scrapped its forward guidance on interest rates and said it would patiently continue with monetary easing.
Japan Mar industrial production fell -0.7% y/y, a smaller decline than expectations of -1.2% y/y.
Japan Mar retail sales rose +0.6% m/m, stronger than expectations of +0.3% m/m.
Japan Tokyo Apr CPI ex-fresh food and energy rose +3.8% y/y, stronger than expectations of +3.5% y/y and the biggest increase in 41 years.
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.
