The Dollar Takes a Step Forward
The dollar index (DXY00) saw a modest rise of +0.07% on Friday, reaching a 1-week high. The increase was fueled by the strength in T-note yields and encouraging reports on the US Feb import price index ex-petroleum and Feb manufacturing production. These factors led to a slight recalibration of market expectations regarding a Fed rate cut in the coming months. Additionally, the driving force behind the dollar’s ascent was the fragility in stocks that day, triggering a surge in liquidity demand for the greenback.
Roots of Limitation in Dollar Gains
However, the dollar’s gains were capped following the release of the US Mar Empire manufacturing survey, which painted a bleaker picture than anticipated. The University of Michigan US Mar consumer sentiment index also unexpectedly declined, adding to the dollar’s constrained growth.
EURO/USD Dynamics Unveiled
The EUR/USD (^EURUSD) pair exhibited a rise of +0.07% on Friday, with the euro bouncing back from a 1-week low. The strengthening European government bond yields, particularly the 10-year German bund yield’s ascent to a 2-week high, propelled the euro higher. Initially, the euro trended downwards in response to dovish remarks from ECB Governing Council member Rehn suggesting potential interest rate cuts this summer. Eurozone inflation data revealed a mixed bag of results, with France’s Feb CPI (EU harmonized) getting a slight upward revision while Italy’s Feb CPI (EU harmonized) facing a downward adjustment.
BOJ Deliberations on the Yen
Meanwhile, USD/JPY (^USDJPY) observed a rise of +0.46% on Friday, notwithstanding an initial uptick that gave way to a decline resulting in a 1-week low. The yen’s trajectory was influenced by T-note yields, with a surge in Japanese union pay contributing to a positive outlook for the BOJ potentially ending its negative interest rate program.
Precious Metal Tale: Gold and Silver
On the commodities front, April gold (GCJ4) closed on a negative note, down -6.0 (-0.28%), while May silver (SIK24) witnessed a positive upswing of +0.321 (+1.28%). The precious metals market experienced a mixed settlement, with silver hitting a 3-1/4 month high. The rally in the dollar index, higher global bond yields, and hawkish US economic reports played a role in putting pressure on metals. Furthermore, funds continued to shed their long gold positions, resulting in a 4-year low in ETF gold holdings.
While gold finds support in the anticipation of interest rate cuts by the Fed and ECB commencing in June, silver benefits from the recent surge in copper prices and robust US Feb manufacturing production report. Geopolitical tensions in the Middle East also underpin the prices of precious metals.
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This article serves informative purposes only. The author does not hold positions in the securities mentioned here directly or indirectly. For detailed disclosures, refer to the Barchart Disclosure Policy.
The expressed views in this article are of the author’s and do not necessarily represent those of Nasdaq, Inc.
