Dollar Pushes Higher on Hawkish US Jobless Claims Report

The dollar index (DXY00) today is up by +0.36%.  The dollar garnered support today after weekly US jobless claims fell more than expected to a 4-month low, a hawkish factor for Fed policy. Also, higher T-note yields today have strengthened the dollar’s interest rate differentials.  The dollar fell back from its best levels today after the British pound (^GBPUSD) surged to a 2-1/2 year high when the BOE kept interest rates unchanged.

US weekly initial unemployment claims fell -12,000 to a 4-month low of 219,000, showing a stronger labor market than expectations of 230,000.

The US Aug Philadelphia Fed business outlook survey rose +8.7 to 1.7, stronger than expectations of 0.0.

US Aug existing home sales fell -2.5% m/m to a 10-month low of 3.86 million, weaker than expectations of 3.90 million.

US Aug leading economic indicators fell -0.2% m/m, a smaller decline than expectations of -0.3% m/m.

The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and a 38% chance for a -50 bp rate cut at that meeting.

EUR/USD (^EURUSD) today is up by +0.01%.  The euro is slightly higher today based on hawkish comments from ECB Executive Board member Schnabel, who said sticky services inflation is keeping headline inflation elevated.  Gains in the euro are limited after today’s news showed a slump in Eurozone new car registrations by the most in over two years.

Eurozone Aug new car registrations fell -18.3% y/y to 644,000 units, the biggest decline in 2-1/3 years.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 26% for the October 17 meeting and at 100% for that 25 bp rate cut at the December 12 meeting.

USD/JPY (^USDJPY) today is up by +0.66%.  The yen today dropped to a 1-1/2 week low against the dollar.  Higher T-note yields today are undercutting the yen.  Also, today’s sharp +2% rally in the Nikkei Stock Index to a 2-week high curbed safe-haven demand for the yen.  Finally, long liquidation in the yen ahead of Friday’s BOJ meeting results is weighing on the yen. 

Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for Friday’s meeting and at +8% for the October 30-31 meeting.

December gold (GCZ24) today is up +0.06 (+0.02%), and December silver (SIZ24) is up +0.363 (+1.18%).  Precious metals today are moving higher, with silver prices climbing to a 2-month high.  Precious metals have carryover support from Wednesday when the FOMC cut interest rates by -50 bp and projected another -50 bp worth of rate cuts by the end of this year.  Also, fund buying of gold supported gold prices as long gold positions in ETFs rose to a 7-1/4 month high Wednesday.  Silver has carryover support from today’s rally in copper prices to a 2-month high on hopes that the Fed’s aggressive rate cuts will spur economic growth that boosts demand for industrial metals.

More Forex News from Barchart

• Dollar Pressured After FOMC Cuts Interest Rates by 50 bp
• Dollar in Defensive Mode Ahead of FOMC Decision
• Dollar Moves Higher and Gold Falls on Signs of US Economic Strength
• Dollar Rebounds on Strength in US Economic Reports

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.