Silver holds above two-week trough as dollar dips
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 $23.22.
The Dollar
The dollar index fell 0.1% on Friday, sharpening losses for the fourth straight session, and plumbing five-week lows at 102.05 against a basket of major rivals.
A batch of weak US data this week showed the economy is slowing down markedly with consumer and producer prices tapering off, in turn hurting prospects of US policy tightening this year.
Thursday data showed factory output tumbled unexpectedly in May with the manufacturing sector suffering from higher interest rates, with US imports falling last month.
Other data showed US unemployment claims remained rather high at 262 thousand last week, way above expectations of 246 thousand.
The Fed
As expected, the Federal Reserve announced a temporary pause in the measures of policy tightening yesterday.
The Federal Reserve maintained interest rates unchanged between 5% and 5.25% as expected, the highest since August 2008.
The Fed said it'll continue to monitor data and economic developments in order to modify policies accordingly.
Chinese Demand
Chinese authorities launches a program of monetary stimulation that includes interest rate cuts on deposits and short-term borrowing costs following a host of weak Chinese data that stoked concerns.
Such measures alongside more aggressive spending by the government is expected to boost demand on silver and metals.
Yen hovers near seven-month trough following Bank of Japan decisions
Yen declined in European trade on Friday against a basket of major rivals, heading for second straight loss against dollar and almost hitting seven-month lows plumbed already yesterday following Bank of Japan's policy decisions.
The bank continues to maintain is monetary easing policies and ultra-row interest rates, reasserting its bearish stance which is at odd with the stance of most other global central banks.
USD/JPY rose 0.8% to 141.40, with a session-low at 139.85, after falling 0.2$% 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.
Gold extends recovery as dollar loses ground
Gold prices rose in European trade on Friday for a second day off three-month lows as the dollar lost ground against a basket of major rivals.
Earlier weak US data forced the Federal Reserve to temporarily pause policy tightening this month to better assess economic conditions and developments.
Gold Prices Today
Gold prices rose 0.3% to $1,963 an ounce, with a session high at $1,954, after rising 0.8% on Thursday off three-month lows at $1,925.
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.
Investors are now focused on purchasing currencies with better investment opportunities such as euro and the pound on strong prospects of further interest rate hikes in Europe and the UK.
Weak Data
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.
However, US retail sales rose unexpectedly in May as consumers increase spending on cars and construction equipment in particular.
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.
Such a transient pause in policy tightening comes after ten consecutive meetings of interest rate hikes to combat record US inflation.
The Fed said it'll continue to monitor data and economic developments in order to modify policies accordingly.
Fed Chair Jerome Powell said that maintaining interest rates unchanged comes as the Committee continues to monitor economic conditions and data for the time being.
Powell said it might be useful to turn to rate hikes once more later this year, but moderately to contain inflation further.
US Rates
Current pricing for a 0.25% Fed rate at the July meeting now rose from 60% to 72%.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at 929.70 tones, the lowest since May 2.
Euro on track for biggest weekly profit in 2023 after ECB decision
Euro rose in European trade on Friday against a basket of major rivals, extending gains for the fifth straight session against dollar and hitting five-week highs, on track for the biggest weekly profit this year following bullish decisions by the ECB.
The European Central Bank raised interest rates to 2008 highs with President Christine Lagarde hinting at more rate hikes at upcoming meetings.
The interest rate gap between Europe and and the US shrank to 125 basis points, the smallest such gap since May 2022, with the ECB likely to shrink that gap even further.
EUR/USD rose 0.2% to 1.0962, the highest since May 11, with a session-low at 1.0935.
Euro spiked 1.1% against dollar on Thursday, the fourth such profit in a row, and the largest daily profit since February 1st.
Weekly Trading
Euro is up 2.0% so far this week against dollar on track for the second weekly profit in a row, and the largest since 2023.
ECB
As expected, the European Central Bank raised interest rates by 25 basis points, the eighth such increase in a row to 4.0%, the highest since October 2008.
The ECB expects inflation to remain high for an extended period of time and asserted its commitment to bring inflation down to the 2% target.
And indeed, ECB's future outlook estimates inflation to fall down to 2% in the next two years in the euro zone.
Lagarde
ECB President Christine Lagarde said there's no clear evidence that core inflation has reached a peak, adding there's still a lot of space to raise interest rates to contain inflation.
She added the ECB's journey to cut down inflation hasn't ended yet, and she expects more interest rate hikes at upcoming meetings.
European Rate Outlook
Deutsche Bank's analysts expect another 0.25% rate hike by the ECB at the July meeting.
The Fed
Conversely, the Federal Reserve decided this week to maintain interest rates unchanged following 10 consecutive interest rate cuts.