The dollar index (DXY00) Thursday rose by +0.04%. The dollar garnered modest support Thursday after weekly US jobless claims fell more than expected to a 4-month low, a hawkish factor for Fed policy. Also, higher T-note yields Thursday strengthened the dollar’s interest rate differentials. The dollar fell back from its best levels Thursday after the British pound (^GBPUSD) surged to a 2-1/2 year high when the BOE kept interest rates unchanged. Also, some negative carryover from Wednesday weighed on the dollar after the Fed cut interest rates by 50 bp and projected another 50 bp in rate cuts this year.
US weekly initial unemployment claims fell -12,000 to a 4-month low of 219,000, showing a stronger labor market than expectations of 230,000.
The US Aug Philadelphia Fed business outlook survey rose +8.7 to 1.7, stronger than expectations of 0.0.
US Aug existing home sales fell -2.5% m/m to a 10-month low of 3.86 million, weaker than expectations of 3.90 million.
US Aug leading economic indicators fell -0.2% m/m, a smaller decline than expectations of -0.3% m/m.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and a 44% chance for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) Thursday rose by +0.38%. The euro posted moderate gains Thursday based on hawkish comments from ECB Executive Board member Schnabel, who said sticky services inflation is keeping headline inflation elevated. Gains in the euro were limited after Thursday’s news showed the biggest slump in Eurozone new car registrations in over two years.
Eurozone Aug new car registrations fell -18.3% y/y to 644,000 units, the biggest decline in 2-1/3 years.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 27% for the October 17 meeting and at 100% for that 25 bp rate cut at the December 12 meeting.
USD/JPY (^USDJPY) Thursday rose by +0.21%. The yen on Thursday dropped to a 1-1/2 week low against the dollar. Higher T-note yields Thursday are undercutting the yen. Also, Thursday’s sharp +2% rally in the Nikkei Stock Index to a 2-week high curbed safe-haven demand for the yen. Finally, long liquidation in the yen ahead of Friday’s BOJ meeting results weighed on the yen.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for Friday’s meeting and at +10% for the October 30-31 meeting.
December gold (GCZ24) Thursday closed up +16.00 (+0.62%), and December silver (SIZ24) closed up +0.739 (+2.42%). Precious metals rallied Thursday, with silver prices climbing to a 2-month high. Precious metals have carryover support from Wednesday when the FOMC cut interest rates by -50 bp and projected another -50 bp worth of rate cuts by the end of this year. Also, fund buying of gold supported gold prices as long gold positions in ETFs rose to a 7-1/4 month high Wednesday. Silver has carryover support from Thursday’s rally in copper prices to a 2-month high on hopes that the Fed’s aggressive rate cuts will spur economic growth that boosts demand for industrial metals.
Gold prices fell back from their best levels today after better-than-expected US economic news on weekly jobless claims and the Aug Philadelphia Fed business outlook survey pushed the dollar index higher. Also, higher global bond yields on Thursday were negative for precious metals. In addition, Thursday’s sharp rally in global equity markets curbed safe-haven demand for precious metals.
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.
