On Thursday, the Dollar Index (DXY00) recorded a 0.18% gain, reaching a 5-3/4 month high. This surge was driven by unexpected positive developments in the U.S. economic landscape. A decline in weekly jobless claims and an upward revision of Q2 labor costs sent a hawkish signal for Federal Reserve policy and bolstered the dollar’s position. Furthermore, concerns over China’s economic prospects contributed to the yuan’s descent to a 15-year low against the dollar.
Thursday’s U.S. economic updates provided ample support for the dollar. Initial unemployment claims in the U.S. unexpectedly dropped by 13,000, reaching a 7-month low of 216,000. This showcased a stronger labor market than anticipated, contrary to expectations of a rise to 233,000. Continuing claims for the week also fell, down by 40,000 to 1.679 million, signaling a robust labor market compared to the expected 1.719 million. Additionally, Q2 nonfarm productivity, though revised slightly lower to +3.5% from the initial +3.7%, exceeded expectations of +3.4%. Lastly, Q2 unit labor costs saw an upward revision to +2.2% from the initial +1.6%, surpassing expectations of +1.9%.
In contrast, the euro faced headwinds as it fell by 0.29% against the dollar, hitting a 3-month low. The dollar’s strength on Thursday exerted downward pressure on the euro. Furthermore, disappointing economic news from the Eurozone contributed to the bearish sentiment for EUR/USD, as Q2 GDP was revised lower, and German July industrial production fell more than predicted.
The revised Eurozone Q2 GDP figures showed growth at +0.1% quarter-on-quarter and +0.5% year-on-year, down from the previously reported +0.3% q/q and +0.6% y/y. German industrial production for July declined by -0.8% month-on-month, falling short of the -0.4% y/y expectations.
USD/JPY (^USDJPY) experienced a 0.29% decrease on Thursday. The yen rebounded from a 10-month low against the dollar and displayed moderate gains. This resurgence was driven by a stock market downturn on Thursday, increasing the yen’s appeal as a safe-haven asset. Additionally, BOJ Board member Nakagawa’s statement, emphasizing the BOJ’s close monitoring of foreign exchange rates in coordination with the government, offered support to the yen.
Japanese economic news on Thursday presented a bearish outlook for the yen, with the July leading index CI declining by -1.2 to reach a 2-3/4 year low of 107.6, missing the expected 107.8.
In the precious metals market, October gold (GCV3) closed down -1.70 (-0.09%), while December silver (SIZ23) closed down -0.263 (-1.12%). Both precious metals experienced moderate losses on Thursday, with silver reaching a 2-1/2 week low. The rally in the dollar index to a 5-3/4 month high weighed on metal prices. Additionally, concerns about industrial metals demand emerged following the downward revision of Eurozone Q2 GDP and the larger-than-expected drop in German July industrial production. Gold prices remained under pressure due to ongoing liquidation of gold holdings by funds after long gold holdings in ETFs hit a 3-1/3 year low on Wednesday. However, gold losses were somewhat mitigated as Thursday’s stock market selloff spurred safe-haven demand for the precious metal.
Featured Image: Freepik @ diloka107
Author Faith Yakubu 
