Dollar Rises On Hawkish Fed Talk

Rich Asplund - Barchart - 12 minutes ago

The dollar index (DXY00) on Thursday rose by +0.95%. The dollar Thursday posted moderate gains, supported by higher T-note yields. Also, the weakness in stocks Thursday boosted the liquidity demand for the dollar. The dollar extended its gains throughout the day on hawkish comments from several Fed members.

Thursday’s U.S. economic news was bearish for the dollar after weekly initial unemployment claims rose +29,000 to a 5-week high of 219,000, showing a weaker labor market than expectations of 204,000.

Fed comments Thursday were hawkish for monetary policy and supportive of the dollar. Fed Governor Cook said U.S. inflation remains "stubbornly and unacceptably high," and the Fed is likely to keep policy "restrictive for some time." Also, Chicago Fed President Evans said momentum in core inflation is "most concerning" to the Fed, and the fed funds target range is headed to 4.50% to 4.75%, likely by the springtime of 2023. In addition, Minneapolis Fed President Kashkari said he is not seeing evidence that underlying inflation has peaked and that the Fed is "quite a ways away" from a pause in interest rate hikes.

EUR/USD (^EURUSD) on Thursday fell by -0.92%. Eurozone economic news Thursday signaled slower growth and weighed on the euro after Eurozone Aug retail sales and German Aug factory orders declined. Also, the dovish minutes from the ECB’s September meeting undercut EUR/USD when the minutes stated that some policymakers saw a 50 bp rate hike as sufficient given recession risks.

Eurozone Aug retail sales fell -0.3% m/m, right on expectations, and the third straight month sales declined.

German Aug factory orders fell -2.4% m/m, weaker than expectations of -0.7% m/m and the biggest decline in 5 months.

The German Sep S&P Global construction PMI fell -0.8 to 41.8, the steepest pace of contraction in 1-1/2 years.

USD/JPY (^USDJPY) on Thursday rose by +0.30%. The yen Thursday posted moderate losses as higher T-note yields weighed on the yen. Also, Thursday’s rally in the Nikkei Stock Index to a 2-week high reduced the safe-haven demand for the yen.

December gold (GCZ22) Thursday was unchanged, and December silver (SIZ22) closed up +0.116 (+0.56%). Gold and silver Thursday settled steady to moderately higher. Metals found support Thursday after a larger-than-expected increase in U.S. weekly jobless claims bolstered speculation that a weaker labor market may prompt the Fed to soften its aggressive monetary stance. Gains in metals were limited Thursday due to a stronger dollar and higher global bond yields. Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/4 year low Wednesday.
Dollar Rises On Hawkish Fed Talk (barchart.com)