The dollar index (DXY00) Friday rose by +0.44%. The dollar moved higher Friday on the heels of a better-than-expected US May payroll report, easing concerns that the US labor market was cooling. Also, hawkish comments on Friday from Cleveland Fed President Hammack boosted the dollar when she said she'd rather wait before adjusting interest rates. In addition, the dollar garnered support Friday on signs of easing trade tensions between the US and China after US trade adviser Navarro said a meeting with China is expected in seven days. The dollar fell from its best levels Friday after Philadelphia Fed President Harker said he could see a Fed cut later this year if inflation continues to decline.
US May nonfarm payrolls rose +139,000, stronger than expectations of +126,000, although Apr nonfarm payrolls were revised lower to +147,000 from the previously reported +177,000. The May unemployment rate remained unchanged at 4.2%, right on expectations.
US May average hourly earnings rose +0.4% m/m and +3.9% y/y, stronger than expectations of +0.3% m/m and +3.7% y/y.
US Apr consumer credit rose +$17.873 billion to a 4-month high, better than expectations of +$10.000 billion.
Cleveland Fed resident Hammack said she'd rather wait for further clarity on the economic impact of a variety of policy changes before adjusting interest rates, and now "is not a good time to be preemptive."
Philadelphia Fed President Harker favors the Fed waiting before cutting rates and said, "I could see in the second half of the year, if things resolve themselves, and we start to see more clarity, and we continue to see inflation coming down to 2%, I could definitely see a rate cut in the offing."
The markets are discounting the chances at 0% for a -25 bp rate cut after the June 17-18 FOMC meeting.
EUR/USD (^EURUSD) Friday fell by -0.39%. The euro was under pressure Friday after a better-than-expected US May payroll report boosted the dollar. Also, weaker-than-expected economic news weighed on the euro after Eurozone Apr retail sales rose less than expected and German Apr industrial production fell more than expected. Losses in the euro were limited after Eurozone Q1 GDP was revised higher and after ECB Governing Council member Stournaras said the ECB should pause interest rate cuts.
Eurozone Q1 GDP was revised higher to +0.6% q/q and +1.5% y/, stronger than expectations of +0.4% q/q and +1.2% y/y.
Eurozone Apr retail sales rose +0.1% m/m, weaker than expectations of +0.2% m/m.
German Apr industrial production fell -1.4% m/m, weaker than expectations of -1.0% m/m.
ECB Governing Council member Stournaras said, "The bar for another ECB rate cut is high, in July and beyond," and the ECB should pause its interest rate cuts to give officials a chance to assess recent shocks, particularly from trade.
Swaps are discounting the chances at 27% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) Friday rose by +0.88%. The yen tumbled to a 1-week low against the dollar on Friday due to on weaker-than-expected reports on Japanese household spending and leading economic index. The yen also came under pressure Friday on a Bloomberg report that said the BOJ is likely to discuss making smaller reductions in their buying of government bonds at this month's policy meeting. Losses in the yen accelerated Friday after T-note yields jumped on the stronger-than-expected US May payroll report.
The Japan Apr leading index CI fell -4.2 to a 4-1/2 year low of 103.4, weaker than expectations of 103.9.
Japan Apr household spending unexpectedly fell -0.1% y/y, weaker than expectations of a +1.5% y/y increase.
Bloomberg reported that the BOJ is likely to discuss slowing its pullback from buying government bonds and making smaller reductions from the current pace of 400 billion yen ($2.8 billion) per quarter when it meets later this month.
August gold (GCQ25) Friday closed down -28.50 (-0.84%), and July silver (SIN25) closed up +0.334 (+0.93%). Precious metals on Friday settled mixed, with silver rallying to a 13-year high. The strength of the dollar on Friday undercut precious metals prices. Also, Friday's rally in the S&P 500 to a 3-1/2 month high and higher T-note yields curbed safe-haven demand for precious metals. Gold prices were pressured by hawkish central bank comments, with Cleveland Fed resident Hammack stating that she'd rather wait for further clarity before adjusting rates and ECB Governing Council member Stournaras suggesting that the ECB should pause its interest rate cuts.
Precious metals garnered support Friday from a Bloomberg report that said the BOJ is considering smaller reductions in its government bond purchases. Also, precious metals prices have continued safe-haven support from global trade tensions and geopolitical tensions in Ukraine and the Middle East.
Silver prices rallied on Friday on better-than-expected global economic news, which is positive for industrial metals demand. The US May payroll report was stronger than expected, and Eurozone Q1 GDP was revised higher. Fund buying is also supporting gains in silver after silver holding in ETFs rose to a nearly 2-year high on Thursday.
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.
