The dollar index (DXY00) on Wednesday fell by -0.14%. The dollar on Wednesday fell moderately as the weaker-than-expected U.S. Apr CPI report knocked T-note yields lower and fueled speculation the Fed may be done with its rate-hike campaign. Also, strength in EUR/USD weighed on the dollar as the euro rose on hawkish ECB comments.
U.S. Apr CPI eased to a 2-year low of 4.9% y/y from 5.0% y/y in Mar, better than expectations of unchanged at 5.0% y/y. Apr CPI ex-food and energy eased to 5.5% y/y from 5.6% y/y in Mar, right on expectations.
The U.S. Apr monthly budget statement was bearish for the dollar as it showed a surplus of $176.2 billion, lower than expectations of $235.0 billion.
EUR/USD (^EURUSD) on Wednesday rose by +0.16%. A weaker dollar Wednesday was supportive of the euro. Also, hawkish comments from ECB President Lagarde and Executive ECB Board member Schnabel boosted the euro when they said they favored additional ECB rate hikes. Eurozone economic concerns limited gains in the euro after Italy's Mar industrial production unexpectedly fell.
ECB President Lagarde said the inflation outlook could face "significant upside risks," and the ECB still has "more ground to cover."
ECB Executive Board member Schnabel said the ECB will continue lifting borrowing costs "with full determination until there are signs that core inflation is also falling on a sustained basis."
Italy Mar industrial production unexpectedly fell -0.6% m/m, weaker than expectations of +0.3% m/m and the biggest decline in 5 months.
USD/JPY (^USDJPY) on Wednesday fell by -0.67%. The yen on Wednesday rallied moderately on dollar weakness and after T-note yields fell on the dovish U.S Apr CPI report. The yen also has support on safe-haven demand from the impasse in the U.S. debt ceiling.
Wednesday’s economic news was bearish for the yen after the Japan Mar leading index CI fell -0.7 to 97.5, weaker than expectations of 97.9.
June gold (GCM3) on Wednesday closed down -5.80 (-0.28%), and July silver (SIN23) closed down -0.240 (-0.93%). Precious metals on Wednesday gave up an early advance and posted moderate losses. Strength in stocks Wednesday reduced safe-haven demand for precious metals. Also, hawkish ECB comments Wednesday from ECB President Lagarde and ECB Executive Board member Schnabel weighed on metals when they said they favored additional ECB rate hikes.
Precious metals Wednesday initially moved higher on a weaker dollar and decline in global bond yields. Also, concern about the health of the U.S. banking system and the U.S. debt limit impasse has boosted safe-haven demand for precious metals. That has led to strong fund buying of gold as gold holdings in exchange-traded funds (ETFs) rose to a 4-month high on Tuesday.
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.
