The dollar index (DXY00) Thursday rose by +0.07%. The dollar on Thursday rose modestly after US Q1 nonfarm productivity rose as expected. Also, higher T-note yields on Thursday were favorable for the dollar. In addition, hawkish comments from Chicago Fed President Goolsbee supported the dollar when he said fiscal policy uncertainty may lead to fewer Fed rate cuts.
Limiting gains in the dollar was a larger-than-expected increase in weekly US jobless claims, a dovish factor for Fed policy. Also, strength in the yen weighed on the dollar as the yen rallied to a 1-3/4 month high Thursday.
US weekly initial unemployment claims rose +11,000 to 219,000, showing a weaker labor market than expectations of 213,000.
US Q4 nonfarm productivity rose +1.2%, right on expectations. Q4 unit labor costs rose +3.0%, weaker than expectations of +3.4%.
Chicago Fed President Goolsbee said he expects some Fed interest rate cuts over the next 18 months, but fiscal policy uncertainty may lead to fewer rate cuts.
The markets are discounting the chances at 16% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) Thursday fell by -0.13%. Strength in the dollar Thursday weighed on the euro. Also, Thursday's weaker-than-expected Eurozone Dec retail sales report undercut the euro. In addition, dovish comments Thursday from ECB Executive Board member Cipollone undercut the euro when he said the ECB still has room to cut interest rates. Thursday's larger-than-expected increase in German Dec factory orders supported the euro.
Eurozone Dec retail sales fell -0.2% m/m, weaker than expectations of -0.1% m/m.
German Dec factory orders rose +6.9% m/m, stronger than expectations of +2.0% m/m.
The German Jan S&P construction PMI rose +4.7 to a 1-1/2 year high of 42.5.
ECB Executive Board member Cipollone said, "We all agree there is still room for the ECB to adjust interest rates downward as the convergence with the inflation target is coherent with a declining interest rate path."
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.
USD/JPY (^USDJPY) Thursday fell by -0.79%. The yen has moved higher every day this week and posted a 1-3/4 month high against the dollar on Thursday. The yen rallied Thursday on hawkish comments from BOJ Board member Tamura and former BOJ Governor Kuroda, who expressed their support for additional BOJ interest rate hikes.
Former BOJ Governor Kuroda said Japan has "completely" ended deflation, and it is absolutely natural for the BOJ to proceed with rate hikes to normalize policy.
BOJ Board member Tamura said, "The short-term interest rate should be at the 1.0% level by the second half of fiscal 2025," up from the current 0.5% to contain upside risks for prices and achieve the price stability target.
April gold (GCJ25) Thursday closed down -16.30 (-0.56%), and March silver (SIH25) closed down -0.350 (-1.06%). Precious metals on Thursday posted moderate losses. Thursday's stronger dollar and higher T-note yields were bearish for metals. Hawkish central bank comments Thursday weighed on precious metals after Chicago Fed President Goolsbee said fiscal policy uncertainty may lead to fewer Fed rate cuts. Also, BOJ Board member Tamura said he supports additional rate hikes by the BOJ. Silver prices came under pressure after the BOE cut its UK 2025 GDP forecast, a negative factor for industrial metals demand.
Losses in precious metals were limited Thursday after the BOE cut interest rates by -25 bp, which boosted demand for precious metals as a store of value. Also, dovish comments from ECB Executive Board member Cipollone were bullish for precious metals when he said the ECB still has room to cut interest rates. Safe-haven demand for precious metals remains firm due to US-China trade tensions after China retaliated to US tariffs on its goods by imposing tariffs on US goods.
