US Dollar Gains Momentum
The US dollar index (DXY00) exhibited robust growth, climbing by +0.60% on Thursday. This upward trajectory was fueled by a wave of encouraging US economic reports that injected vigor into the currency. The unexpected decline in weekly jobless claims, the surge in Mar S&P manufacturing PMI to a 1-3/4 year high, and the sudden rise in Feb existing home sales to a 1-year pinnacle all served as bullish indicators for forthcoming Fed policies, bolstering the dollar’s standing. Furthermore, the dollar received an additional push from the British pound’s dip to a 2-1/2 week low following the BOE’s decision to maintain unchanged interest rates. The absence of any policy member voting for a rate hike, a deviation from September 2021’s stance, further elevated the dollar’s position.
Strength in Labor Market and Manufacturing
US weekly initial unemployment claims delivered a positive surprise, plummeting by -2,000 to 210,000, showcasing a more robust labor market than anticipated. Similarly, the weekly continuing claims edged up by +4,000 to 1.807 million, painting a stronger labor market picture. In addition, the US Mar Philadelphia Fed business outlook survey, though dipping by -2.0 to 3.2, outperformed expectations of a steeper decline to -2.5. The US Mar S&P manufacturing PMI defied projections by ascending +0.3 to hit a 1-3/4 year high of 52.5, surpassing the anticipated dip to 51.8.
Optimistic Indicators for Housing Sector
US Feb existing home sales pleasantly surprised, recording a notable +9.5% rise month-over-month to reach a 1-year peak of 4.38 million. This figure defied expectations of a decline to 3.95 million. The US Feb leading indicators also bucked projections by unexpectedly rising +0.1% month-over-month, defying estimates of a -0.1% decline. Anticipation for a -25 bp rate cut at the upcoming April 30-May 1 FOMC meeting stands at a modest 12%, highlighting the positive sentiment regarding future economic policies.
Impact on Euro and Yen
Conversely, the euro took a hit, with EUR/USD (^EURUSD) dipping by -0.58% following Eurozone Mar S&P manufacturing PMI’s unexpected decline. The Eurozone Mar S&P manufacturing PMI sagged by -0.8 to 45.7, falling short of the anticipated rise to 47.0, exerting a dovish influence on ECB policy. Market sentiment swayed further in favor of the dollar after the release of robust US economic reports.
Variable Scenarios in Japan
Meanwhile, the Japanese yen saw a moderate decline as USD/JPY (^USDJPY) rose by +0.28%. Despite the yen hovering slightly above its 4-1/4 month low against the dollar, the yen found support from positive Japanese trade news. Japan’s Feb exports surged by +7.8% y/y, surpassing expectations, while Feb imports remained in line with projections. Anticipation for a +10 bp rate increase by the BOJ stands at 1% for the upcoming April 26 meeting, offering potential opportunities for investors considering the Japanese market.
Untangling Precious Metal Market Movements
Amidst dynamic shifts, April gold (GCJ4) closed up +23.7 (+1.10%), while May silver (SIK24) closed down -0.097 (-0.39%). Precious metals experienced a mix of highs and lows, with April gold reaching a contract high, fueled by a surge in gold buying from China as a safeguard against economic uncertainties, including the ongoing property crisis and market turmoil. The geopolitical tensions in the Middle East further underpinned safe-haven demand for precious metals. However, the rally in the dollar post-US economic reports and the buoyant global equity markets on Thursday reduced the safe-haven appeal of precious metals, leading to a pullback from their peak levels.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
