The dollar index (DXY00) on Thursday climbed to a 6-week high and finished up by +0.20%.  Hawkish comments Wednesday night from Fed Governor Waller boosted the dollar when he said there’s “no rush” for the Fed to ease monetary policy.  The dollar extended its gains on Thursday’s mostly better-than-expected US economic reports, which were hawkish for Fed policy.

US weekly initial unemployment claims unexpectedly fell -2,000 to 210,000, showing a stronger labor market than expectations of an increase to 212,000.

US Q4 GDP was revised upward to +3.4% (q/q annualized), stronger than expectations of an unrevised 3.2%, as Q4 personal consumption was revised upward to 3.3%, stronger than expectations of an unrevised 3.0%.  The Q4 core PCE price index was revised lower to +2.0% (q/q annualized), weaker than expectations of an unrevised +2.1%.

The US Mar MNI Chicago PMI unexpectedly fell -2.6 to a 10-month low of 41.4, weaker than expectations of an increase to 46.0.

US Feb pending home sales rose +1.6% m/m, slightly stronger than expectations of +1.5% m/m.

The March University of Michigan US consumer sentiment index was revised upward to a 2-1/2 year high of 79.4, stronger than expectations of an unrevised 76.5.

Fed Governor Waller said recent inflation figures were "disappointing," and in his view, "it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data."  He added, "I see economic output and the labor market showing continued strength while progress in reducing inflation has slowed.  Because of these signs, I see no rush in taking the step of beginning to ease monetary policy."

The markets are discounting the chances for a -25 bp rate cut at 10% for the next FOMC meeting on April 30-May 1 and 67% for the following meeting on June 11-12.

EUR/USD (^EURUSD) on Thursday fell to a 5-week low and finished down by -0.39%.  Strength in the dollar Thursday undercut the euro.  Also, Thursday’s Eurozone money supply report and German Feb retail sales report were dovish for ECB policy and weighed on the euro.  In addition, dovish comments from ECB Governing Council members Panetta and Villeroy de Galhau pressured the euro when they said the conditions for monetary easing are emerging and rate cuts should begin in the spring.

Eurozone Feb M3 money supply rose +0.4% y/y, slightly stronger than expectations of +0.3% y/y and the biggest increase in 8 months.

German Feb retail sales unexpectedly fell -1.9% m/m, weaker than expectations of a +0.4% m/m increase and the biggest decline in 16 months.

German Mar unemployment rose by +4,000, a smaller increase than expectations of +10,000 and a sign of a resilient labor market.

ECB Governing Council member Panetta said, "Risks for price stability have decreased, and the conditions for a monetary loosening are coming about."

ECB Governing Council member Villeroy de Galhau said the ECB's 2% inflation target is now "within sight."  He added that rate cuts should begin in the spring as they are needed to insure against economic damage.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 11% for its next meeting on April 11 and 95% for the following meeting on June 6.

USD/JPY (^USDJPY) on Thursday rose by +0.06%.  The yen on Thursday gave up an early advance and turned lower on higher T-note yields.  The yen initially moved higher Thursday on speculation that Japanese authorities may be close to intervening in currency markets to support the yen, which fell to a nearly 34-year low against the dollar on Wednesday.  Thursday's Comments from Japanese Prime Minister Kishida echoed comments made Wednesday by Finance Minister Suzuki and top currency official Kanda when he said authorities would take the appropriate action on excessive forex moves.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 2% for the April 26 meeting and 9% for the following meeting on June 14.

April gold (GCJ4) on Thursday closed up +26.8 (+1.22%), and May silver (SIK24) closed up +0.164 (+0.66%).  Precious metals on Thursday posted moderate gains.  Precious metals prices Thursday saw some short covering ahead of Friday’s US Feb PCE core deflator report, the Fed’s preferred inflation gauge.  The markets will be closed on Friday for the Good Friday holiday when the report will be released.  Also, dovish comments from ECB Governing Council members Panetta and Villeroy de Galhau boosted gold when they said the conditions for monetary easing are emerging and rate cuts should begin in the spring.  In addition, geopolitical tensions in the Middle East are boosting safe-haven demand for precious metals after talks for a cease-fire between Israel and Hamas stalled.  Silver garnered support Thursday after the US Q4 GDP was revised slightly higher, a positive factor for industrial metals demand. 

On the negative side, Thursday’s rally in the dollar index to a 6-week high is negative for metals. Also, Wednesday night’s comments for Fed Governor Waller were bearish for precious metals when he said there’s “no rush” for the Fed to cut interest rates.  In addition, higher global bond yields Thursday were negative for precious metals.

• Dollar Sees Support from Quarter-End Demand
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• Dollar Recovers Early Losses on Quarter-End Dollar Demand
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