Palladium prices rose on Friday amid expectations of improving Chinese demand on commodities and metals in upcoming months. 

Chinese Demand

Earlier Chinese data showed retail sales rose 12.7% in May y/y, while industrial production rose 3.5% y/y.

As China is the world's largest commodity consumer in the world, any positive data reflect on the prices of metals.

Palladium is used heavily in the automotive industry, as it's used to reduce exhaust fumes.

Interest Rates Policies

The European Central Bank raised interest rates this week as expected for the eighth time in a row, and hinted at even more rate hikes to control inflation.

The ECB raised borrowing costs by 4% in a single year, the fastest such pace of rate hike in history. 

It comes a day after the Federal Reserve decided to hold interest rates unchanged this week but expected rate hikes at upcoming meetings to contain inflation.

Otherwise, the dollar index rose 0.2% as of 16:04 GMT to 102.3, with a session-high at 102.4, and a low at 102.01.

Palladium futures due in April rose 1.7% as of 16:05 GMT to $1,420.5 an ounce. 

Oil prices rose in European trade on Friday for a second session to one-week high on hopes for improving Chinese demand, while also boosted by a weaker dollar against a basket of major rivals, making dollar-denominated commodities cheaper to holders of other currencies.

Such considerations overshadowed the sudden increase in US crude stocks according to official EIA data, a negative sign for demand in the world's largest oil consumer.

Global Oil Prices

US crude rose 1.3% to $71.36 a barrel, the highest in a week, while Brent added 0.9% to $76.22 a barrel.

US crude rallied 2.7% on Monday while Brent climbed 2.75%, the second profit in five days away from multi-week lows. 

Chinese Demand

Thursday data showed China's crude refinery output surged 15.4% in May y/y, marking second highest output ever.

Chinese authorities took stimulating measures in recent days, through interest rate cuts on deposits and short-term borrowing costs after recent data showcased weakness in the economy.

Such measures alongside more aggressive spending by the government is expected to boost demand commodities and metals.

The Dollar

The dollar index fell 0.2% on Friday for the fourth straight session, marking five-week lows at 102 against a basket of major rivals.

Recent US data showed weak unemployment claims and industrial production results for May, all signs of major slowdown in the economy.

Such data threatens the Federal Reserve's plan to raise interest rates by two more times this year. 

US Stocks

The Energy Information Administration reported a surge of 7.9 million barrels in US crude stocks last week to 467.1 million barrels, while analysts expected a drop of 1.3 million barrels.

Distillate stocks rose 2.1 million barrels to 113.9 million barrels, while gasoline stocks rose 2.1 million barrels to 220.9 million barrels.

Silver prices rose in European trade on Friday, holding above two-week lows plumbed yesterday, on track for the second profit in three days, as the dollar index declined against most major rivals.

The white metal was boosted as well by improving actual demand in China, with authorities launching stimulating measures to boost growth.

Prices

Silver prices rose 0.6% to $24.04 an ounce, with a session-low at $23.83, after falling 0.2% yesterday, the third loss in four days, after trimming a 3% loss away from two-week lows at $23.22.

The Dollar

The dollar index fell 0.1% on Friday, sharpening losses for the fourth straight session, and plumbing five-week lows at 102.05 against a basket of major rivals.

A batch of weak US data this week showed the economy is slowing down markedly with consumer and producer prices tapering off, in turn hurting prospects of US policy tightening this year.

Thursday data showed factory output tumbled unexpectedly in May with the manufacturing sector suffering from higher interest rates, with US imports falling last month.

Other data showed US unemployment claims remained rather high at 262 thousand last week, way above expectations of 246 thousand.

The Fed

As expected, the Federal Reserve announced a temporary pause in the measures of policy tightening yesterday.

The Federal Reserve maintained interest rates unchanged between 5% and 5.25% as expected, the highest since August 2008.

The Fed said it'll continue to monitor data and economic developments in order to modify policies accordingly.

Chinese Demand

Chinese authorities launches a program of monetary stimulation that includes interest rate cuts on deposits and short-term borrowing costs following a host of weak Chinese data that stoked concerns.

Such measures alongside more aggressive spending by the government is expected to boost demand on silver and metals.

Yen declined in European trade on Friday against a basket of major rivals, heading for second straight loss against dollar and almost hitting seven-month lows plumbed already yesterday following Bank of Japan's policy decisions. 

The bank continues to maintain is monetary easing policies and ultra-row interest rates, reasserting its bearish stance which is at odd with the stance of most other global central banks. 

USD/JPY rose 0.8% to 141.40, with a session-low at 139.85, after falling 0.2$% on Thursday, the fourth loss in five days, marking seven-month lows at 141.50.

BoJ

Bank of Japan voted to maintain interest rates unchanged at the record low of minus 0.1%.

The bank maintained the yield target of the 10-year government bond at zero.

The BoJ said it remains appropriate to maintain current monetary policies unchanged to boost the economy, with the bank committed to continue purchasing government bonds aggressively. 

New BoJ governor, Kazuo Ueda, said the bank needs more time to achieve the 2% inflation target, and added the bank will continue to review the monetary policy undertaken in the past 25 years. 

Analysis 

The BoJ's decisions were expected but a small number of experts dared to expect a change in the bond yield curve targets, thus leading to the currrent weakness in yen.