The dollar index (DXY00) Thursday rose +0.18% and posted a 5-3/4 month high. Thursday’s U.S. economic news that showed an unexpected decline in weekly jobless claims and an upward revision to Q2 labor costs are hawkish for Fed policy and bullish for the dollar. Also, pessimism in China’s economic outlook prompted the yuan to fall to a 15-year low against the dollar.
Thursday’s U.S. economic news was supportive of the dollar. U.S. weekly initial unemployment claims unexpectedly fell -13,000 to a 7-month low of 216,000, showing a stronger labor market than expectations of an increase to 233,000. Also, weekly continuing claims fell -40,000 to 1.679 million, showing a stronger labor market than expectations of 1.719 million. In addition, Q2 nonfarm productivity was revised lower to +3.5% from the initially reported +3.7%, stronger than expectations of +3.4%. Finally, Q2 unit labor costs were revised higher to +2.2% from the initially reported +1.6%, stronger than expectations of +1.9%.
EUR/USD (^EURUSD) Thursday fell by -0.29% and posted a 3-month low. Strength in the dollar Thursday undercut the euro. Also, weaker-than-expected Eurozone economic news was bearish for EUR/USD after Eurozone Q2 GDP was revised lower and German July industrial production fell more than expected.
Eurozone Q2 GDP was revised lower to +0.1% q/q and +0.5% y/y from the previously reported +0.3% q/q and +0.6% y/y.
German July industrial production fell -0.8% m/m, weaker than expectations of -0.4% y/y.
USD/JPY (^USDJPY) Thursday fell by 0.29%. The yen on Thursday recovered from a 10-month low against the dollar and rose moderately. A slump in stocks Thursday boosted the safe-haven demand for the yen. The yen also found support Thursday on comments from BOJ Board member Nakagawa, who said the BOJ will closely coordinate with the government in monitoring foreign exchange rates.
Thursday’s Japanese economic news was bearish for the yen after the July leading index CI fell -1.2 to a 2-3/4 year low of 107.6, weaker than expectations of 107.8.
October gold (GCV3) Thursday closed -1.70 (-0.09%), and December silver (SIZ23) closed -0.263 (-1.12%). Precious metals prices on Thursday posted moderate losses, with silver falling to a 2-1/2 week low. Thursday's rally in the dollar index to a 5-3/4 month high was bearish for metals. Silver prices were undercut by industrial metals demand concerns after Eurozone Q2 GDP was revised downward and German July industrial production fell more than expected. In addition, gold prices are under pressure on continued liquidation of gold holdings by funds after long gold holdings in ETFs fell to a 3-1/3 year low Wednesday. Losses in gold were limited as Thursday’s selloff in stocks sparked some safe-haven demand for gold.
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.
