The dollar index (DXY00) climbed to a fresh 1.5-year high on Thursday, finishing up +0.26%. The dollar erased overnight losses and turned higher Thursday after crude oil prices and T-note yields rose on hawkish comments from President Trump, who said the US doesn’t need a deal with Iran. The dollar added to its gains Thursday on hawkish Fed comments. Cleveland Fed President Beth Hammack, Chicago Fed President Austan Goolsbee, and San Francisco Fed President Mary Daly all said they favored additional Fed interest rate hikes.
Dollar gains were limited Thursday after US weekly jobless claims rose more than expected, a dovish factor for Fed policy. Also, US Sep existing home sales fell more than expected to a 16-year low.
US weekly initial unemployment claims rose +9,000 to 200,000, showing a slightly weaker labor market than expectations of 194,000.
US Oct existing home sales fell -5.5% m/m to a 16-year low of 3.75 million, weaker than expectations of 3.85 million.
Cleveland Fed President Beth Hammack said inflation is "moving in the wrong direction," and the Fed needs to move to a restrictive policy stance.
Chicago Fed President Austan Goolsbee said the Fed needs to act to tame inflation before the economy overheats, which would make the situation more difficult for policymakers. He also cautioned that the build-out of artificial intelligence infrastructure may be leading to an overheating of demand in the economy.
San Francisco Fed President Mary Daly said, "My bias is that further tightening will be needed because you just see this consistent pressure on inflation that isn't simply in the sectors that are most directly affected by tariffs or oil."
The markets are now pricing in a 100% chance of a +25 bp rate hike at the FOMC’s next meeting on December 8-9.
EUR/USD (^EURUSD) slipped to a new 1.5-year low on Thursday, finishing down -0.30%. The euro was under pressure on Thursday from a stronger dollar. Also, the +2% jump in crude oil prices on Thursday was negative for the Eurozone economy and the euro, as Europe imports most of its energy.
The markets are now pricing in a 93% chance of a +25 bp rate hike at the ECB’s next policy meeting on December 17.
USD/JPY (^USDJPY) rose by +0.02% on Thursday. The yen fell to a 2.25-month low against the dollar Thursday after crude oil prices erased early losses and rose more than +2%, which is negative for Japan’s economy and the yen, as Japan imports more than 90% of its energy. Also, higher T-note yields on Thursday were bearish for the yen.
Losses in the yen were limited Thursday after Japan's finance ministry's top currency official, Atsushi Mimura, said, "I have a strong impression that the currency moves over the past few days have been too fast," bolstering speculation that Japanese authorities could soon intervene in the forex market to support the yen. Also, comments from BOJ Board member Toichiro Asada, one of two board members to vote against a BOJ rate hike in September, were supportive of the yen when he said isn't taking a stance against raising interest rates
BOJ Board member Toichiro Asada, one of two board members to vote against a BOJ rate hike in September, says he isn't taking a stance against raising interest rates no matter what, but the BOJ needs to be careful about the pace of its moves.
The market is pricing in an 82% chance of a +25 bp BOJ rate hike at its next meeting on December 18.
December COMEX gold (GCZ26) closed down -115.20 (-2.88%) on Thursday, and December COMEX silver (SIZ26) closed down -1.937 (-3.72%).
Precious metals sold off on Thursday, with gold plunging to a 13.5-month low and silver sliding to a 1-week low. Thursday’s rally in the dollar index to a 1.5-year high is bearish for metals. Also, the +2% jump in crude oil prices Thursday raised inflation expectations and could persuade global central banks to tighten monetary policy, a bearish factor for precious-metals demand. Higher global government bond yields on Thursday also weighed on precious metals prices.
Losses in precious metals accelerated Thursday on hawkish comments from several Fed members. Cleveland Fed President Beth Hammack, Chicago Fed President Austan Goolsbee, and San Francisco Fed President Mary Daly all said they supported additional Fed interest rate hikes.
Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 4.25-year high on October 21, although those holdings have since backed off. Long holdings in silver ETFs rose to a 7.75-month high last Tuesday.
Strong central bank demand for gold is supporting gold prices. Recent World Gold Council data showed cumulative gold purchases by global central banks in Q3 were 321,000 MT, the most since Q4 of 2024. Also, Sunday’s news showed that bullion held in China's PBOC reserves rose by 830,000 ounces to 78.30 million troy ounces in October, the largest increase in three years and the twenty-fourth consecutive month the PBOC boosted its gold reserves.
On the date of publication, Rich Asplund did not directly have a position 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.