The dollar index (DXY00) on Thursday rose +0.222 (+0.23%). On Thursday, the dollar recovered from early losses and posted moderate gains. After posting moderate gains Thursday morning, stocks trended lower and gave up most of their advance, which boosted liquidity demand for the dollar. Lower T-note yields Thursday initially weighed on the dollar.
EUR/USD (^EURUSD) on Thursday fell -0.0032 (-0.28%). EUR/USD on Thursday gave up an early advance and fell to a 1-week low. Dovish comments Thursday from ECB Governing Council member de Cos undercut the euro when he said under current conditions and inflation forecasts, "an increase in interest rates is not expected in 2022." EUR/USD on Thursday initially moved higher on signs of elevated producer price pressures in Germany that are hawkish for ECB policy after Thursday’s data showed German Dec PPI rose a record +5.0% m/m and +24.2% y/y (data from 1976), stronger than expectations of +0.8% m/m and +19.3% y/y.
USD/JPY (^USDJPY) on Thursday fell -0.18 (-0.16%). USD/JPY on Thursday posted moderate losses after lower T-note yield strengthened the yen. Signs of strength in Japan’s economy were also bullish for the yen after Japan Dec exports rose +17.5% y/y, stronger than expectations of +15.9% y/y.
Thursday’s U.S. economic data was mixed for the dollar. On the positive side, the U.S. Jan Philadelphia Fed business outlook survey rose +7.8 to 23.2, stronger than expectations of 19.0. Conversely, weekly initial unemployment claims unexpectedly rose +55,000 to a 3-month high of 286,000, showing a weaker labor market than expectations of a decline to 225,000. Also, Dec existing home sales fell -4.6% m/m to a 4-month low of 6.18 million, weaker than expectations of 6.42 million.
February gold (GCG22) on Thursday closed down -0.60 (-0.03%), and March silver (SIH22) closed up +0.485 (+2.00%). Precious metals on Thursday settled mixed, with silver posting a new 1-3/4 month highs. Gold prices fell back from a 1-3/4 month high and turned lower after the dollar erased early losses and moved higher. Gold on Thursday initially moved higher on lower global bond yields. Also, the action by the PBOC to reduce borrowing costs is positive for gold demand as a store of value and supportive for silver as the added stimulus could spark economic growth and demand for industrial metals.
The dollar and gold have continued safe-haven support from the negative impact of the worldwide spread of the omicron Covid variant on the global economic recovery. Germany reported a record 133,536 new Covid infections Thursday.
