The dollar index (DXY00) on Thursday fell by -0.60%. The dollar on Thursday slid from a 1-week high and retreated on Thursday's Fed-friendly US economic news that showed the Q1 core PCE price index revised lower, continuing unemployment claims unexpectedly rose to a 3-1/2 year high, and Apr pending home sales posted their biggest decline in more than 2-1/2 years, dovish factors for Fed policy. Strength in stocks today has also curbed liquidity demand for the dollar. Losses in the dollar accelerated on dovish comments from Chicago Fed President Goolsbee, who said the Fed could begin to cut interest rates if there is a resolution in US trade policy.
The dollar on Thursday initially moved higher after a US trade court late Wednesday ruled that some of President Trump's tariffs were illegal. The dollar also garnered support from Thursday's US economic news that showed Q1 GDP revised upward.
US weekly initial unemployment claims rose +14,000 to 340,000, showing a weaker labor market than expectations of 230,000. Weekly continuing claims unexpectedly rose +22,000 to a 3-1/2 year high of 1.919 million versus expectations of a decline to 1.893 million.
US Q1 GDP was revised upward to -0.2% (q/q annualized) from the previously reported -0.3%. The Q1 core PCE price index was revised lower to 3.4% q/q from the previously reported 3.5% q/q.
US Apr pending home sales fell -6.3% m/m, weaker than expectations of -1.0% m/m and the largest decline in more than 2-1/2 years.
Chicago Fed President Goolsbee said a resolution in US trade policy could push the US economy back toward its pre-tariff trajectory and allow the Fed to lower interest rates.
The US Court of International Trade issued a unanimous ruling late Wednesday that said President Trump wrongfully invoked an emergency ruling to justify his "Liberation Day" tariffs on global goods. The order applies to Trump's global 10% flat tariff, elevated rates on China and other countries, and his fentanyl-related tariffs on China, Canada, and Mexico. Other tariffs imposed under different powers, like the Section 232 and Section 301 tariffs, are unaffected and include the tariffs on steel, aluminum, and automobiles. The court gave the administration 10 days to "effectuate" its order.
The markets are discounting the chances at 6% for a -25 bp rate cut after the June 17-18 FOMC meeting.
EUR/USD (^EURUSD) Thursday rose by +0.73%. The euro on Thursday recovered from a 1-1/2 week low and rallied after the dollar gave up overnight gains and turned lower. The euro on Thursday initially moved lower in overnight trade when the dollar briefly spiked higher after a US trade court ruled that some of President Trump's tariffs were illegal.
Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at the June 5 policy meeting.
USD/JPY (^USDJPY) Thursday fell by -0.52%. The yen on Thursday recovered from a 2-week low against the dollar and turned higher after the dollar gave up overnight gains and retreated on Fed-friendly US economic news on weekly jobless claims and the Q1 core PCE price index. The yen also garnered support on Thursday's economic news that showed Japan's May consumer confidence index rose more than expected. In addition, lower T-note yields on Thursday were supportive of the yen.
The yen today initially moved lower when the dollar briefly rallied when a US trade court ruled that some of President Trump's tariffs were illegal. Also, the strength in global equity markets today has curbed safe-haven demand for the yen.
The Japan May consumer confidence index rose +1.6 to 32.8, stronger than expectations of 31.8.
June gold (GCM25) Thursday closed up +22.20 (+0.67%), and July silver (SIN25) closed up +0.263 (+0.79%). Precious metals on Thursday recovered from early losses and settled higher after the dollar index fell from a 1-week high and moved lower. Thursday's US economic news showed weekly jobless claims rose more than expected, a dovish factor that knocked T-note yields lower and boosted precious metals prices. Dovish comments from Chicago Fed President Goolsbee were bullish for precious metals when he said the Fed could begin to cut interest rates if there is a resolution in US trade policy. Precious metals prices also have continued safe-haven support from uncertainty about global trade relations and geopolitical tensions in Ukraine and the Middle East.
Gold prices on Thursday initially fell to a 1-week low after a US trade court late Wednesday ruled that some of President Trump's tariffs were illegal. Thursday's rally in global equity markets also curbed safe-haven demand for precious metals. In addition, easing inflation expectations is curbing demand for gold as an inflation hedge after the US 10-year breakeven inflation rate fell to a 2-week low today.
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.
