Dollar Jumps on a Hot US Payrolls Report

The dollar index (DXY00) this morning is up by +0.48%.  The dollar is moving higher today after US nonfarm payrolls rose more than expected, bolstering expectations that the Fed will be in no hurry to lower interest rates.  Higher T-note yields today are also supportive of the dollar.  Today, strength in equities is curbing liquidity demand for the dollar. 

US Mar nonfarm payrolls rose +303,000, stronger than expectations of +214,000 and the biggest increase in 10 months.  The Mar unemployment rate fell -0.1 to 3.8%, right on expectations.

US Mar average hourly earnings eased to +4.1% y/y from +4.3% y/y in Feb, right on expectations and the slowest pace of increase in 2-3/4 years.

The markets are discounting the chances for a -25 bp rate cut at 6% for the next FOMC meeting on April 30-May 1 and 59% for the following meeting on June 11-12.

EUR/USD (^EURUSD) today is down by -0.23%.  The euro is under pressure today on weaker-than-expected Eurozone economic news on Feb retail sales and German Feb factory orders. Losses in the euro accelerated after the larger-than-expected increase in US Mar nonfarm payrolls boosted the dollar.

Eurozone Feb retail sales fell -0.5% m/m, weaker than expectations of -0.4% m/m.

German Feb factory orders rose +0.2% m/m, weaker than expectations of +0.7% m/m.

The German Feb import price index fell -0.2% m/m and -4.9% y/y, weaker than expectations of unchanged m/m and -4.6% y/y.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 8% for its next meeting on April 11 and 97% for the following meeting on June 6.

USD/JPY (^USDJPY) today is up by +0.174%.  The yen retreated from a 2-week high against the dollar and turned lower after T-note yields jumped on the stronger-than-expected US May payrolls report.  The yen today initially strengthened on better-than-expected Japanese economic news on Feb household spending and the Feb leading index CI.  Also, hawkish comments from BOJ Governor Ueda boosted the yen when he said the likelihood of attaining the bank's inflation target will steadily rise from summer through autumn. 

The Japan Feb leading index CI rose +2.3 to a 1-1/2 year high of 111.8, stronger than expectations of 111.6.

Japan Feb household spending fell -0.5% y/y, stronger than expectations of -2.9% y/y.

BOJ Governor Ueda said the likelihood of attaining the bank's inflation target will steadily rise from summer through autumn, fueling speculation the BOJ will boost interest rates.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 0% for the April 26 meeting and 8% for the following meeting on June 14.

June gold (GCM4) this morning is up +8.3 (+0.36%), and May silver (SIK24) is down -0.277 (-1.02%).  Precious metals this morning are mixed.  Gold shook off early losses today and moved higher on heightened geopolitical risks between Iran and Israel.  Iran threatened retaliation against Israel for launching airstrikes on Iranian military officials in Syria, boosting safe-haven demand for gold.  Also, fund buying of silver supports silver prices after long silver holdings in ETFs rose to a 7-1/4 month high Thursday.

A stronger dollar today is bearish for metals.  Also, today’s stronger-than-expected US Mar nonfarm payrolls report is weighing on precious metals on speculation the strength in the US labor market will keep the Fed from cutting interest rates.  In addition, higher global bond yields today are bearish for precious metals.

More Precious Metal News from Barchart

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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