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The dollar index on Friday surged by +0.55% and posted a 1-1/2 month high. Higher Treasury yields boosted the American currency with the prospects for continued hawkish Fed after Friday’s stronger-than-expected US economic data. The dollar also found support on hawkish comments by Fed officials.
ECB’s Nagel said with core inflation, in particular, still much too high, monetary policy, therefore, has to tighten the reins,” and he “does not exclude further significant interest rate hikes beyond March.”
USD/JPY rose by +1.25%. The yen sold off sharply to a 2-month low against the dollar. Higher T-yields weighed on the yen. The yen was also under pressure on comments by BOJ Governor nominee Ueda who said the BOJ’s current easing is “appropriate” and a sudden tightening now would impact businesses negatively.
April gold closed down -9.70 (-0.53%), and March silver (SIH23) closed down -0.496 (-2.33%). Precious metals posted moderate losses, with gold falling to a 2-month low and silver tumbling to a 3-month low. A rally in the dollar index to a 1-1/2 month high impacted metals prices.
Key Developments
US stocks sharply dropped, adding to their worst week in 2023, after the Federal Reserve’s preferred inflation gauge showed a stronger-than-expected increase in prices last month.
Economic Data
The core personal consumption expenditures price index, the Fed’s preferred measurement of inflation, rose 0.6% in January and 4.7% from the prior year, coming in above economists’ expectations. The report added to worries that the Fed may have to keep rates higher for longer to quell inflationary pressures.
EUR/USD pair fell by -0.40% and dropped to a new 1-1/2 month low on the US trading session’s stronger dollar. The euro was also impacted after Germany’s Q4 GDP was revised lower. German Q4 GDP was revised downward to -0.4% q/q and +0.3% y/y from the previously reported -0.2% q/q and +0.5% y/y.
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