The U.S. dollar surged to a 13-month high on Thursday, driving broad weakness in gold and weighing on the euro and yen. The dollar index finished up 0.80%, supported by recent expectations of higher U.S. rates and a batch of economic releases, even as a drop in crude oil tempered inflation expectations.
U.S. moves rippled through foreign exchange and commodities: gold and silver futures fell sharply, the euro slid to a 2.5-month low, and the yen weakened toward fresh multi-month levels before factoring in rising intervention risk as the currency stayed above 160 per dollar.
Key takeaways
- Dollar higher: The dollar index rose 0.80% to a 13-month high, lifting the currency against major peers.
- Mixed macro signals: Stronger U.S. survey data and lower jobless claims supported the dollar, while weaker oil prices pulled down inflation expectations.
- Metals pressured: August COMEX gold fell 3.09% and July COMEX silver dropped 6.29% as the stronger dollar reduced demand for non-yielding assets.
- FX divergence: EUR/USD fell 0.40% to a 2.5-month low, while USD/JPY gained 0.67% as safe-haven demand weakened.
- Policy uncertainty remains: Rate expectations—FOMC for the U.S. and ECB/BOJ for Europe and Japan—continue to anchor market pricing.
What drove the dollar’s rally
According to market coverage, the dollar’s rise reflected both carryover support from the prior day and Thursday’s U.S. data. After the Federal Open Market Committee projected higher interest rates later this year on Wednesday, investors carried a more hawkish rate outlook into Thursday.
Thursday’s economic releases added support. Weekly initial unemployment claims fell by 4,000 to 226,000, close to the expected 225,000. In addition, the June Philadelphia Fed business outlook survey rose by 10.7 to 10.3, exceeding the 10.0 consensus. The report also noted that U.S. May leading indicators increased 0.1% month over month, matching expectations.
At the same time, oil weakness acted as a counterweight for the dollar. WTI crude fell to a 3.5-month low, which can reduce inflation expectations and leave room for a less restrictive U.S. policy path—typically a bearish factor for the dollar. The article also pointed to a separate dynamic: a stock-market rally can reduce liquidity demand for the dollar.
Foreign exchange: euro and yen under pressure
EUR/USD declined 0.40% on Thursday, settling at a 2.5-month low. The primary driver was the dollar’s strength, but losses were described as partly contained by hawkish commentary from ECB Governing Council member Martin Kocher. Kocher said consumer prices are likely to remain higher for some time in the euro zone despite agreement to end the war in the Middle East, and that the ECB is ready to act at any time to ensure inflation returns to its 2% target.
Markets, according to the coverage, are pricing a higher probability of ECB action at the next policy meeting on July 23, including expectations of a 25 basis point move.
USD/JPY rose 0.67% as the yen weakened to a 23-month low against the dollar. The report attributed the move to the stronger dollar following the Fed’s more hawkish stance earlier in the week. It also linked yen softness to reduced safe-haven demand after the Nikkei Stock Index hit a new record high.
Crude oil’s decline provided some support for Japan and the yen, since Japan is a major net energy importer. However, the article highlighted that with the yen staying firmly above 160 per dollar, the risk of intervention has increased, given that Japanese authorities have previously acted when the currency reached that level. The coverage also noted that markets are pricing a small probability of a 25 basis point BOJ rate hike at the July 31 meeting.
Gold and silver fall as the dollar firms
Gold and silver futures moved lower on Thursday, with the article linking the drop to dollar strength. August COMEX gold closed down 135.50, or 3.09%, while July COMEX silver ended lower by 4.448, or 6.29%.
The decline in precious metals was reinforced by carryover from Wednesday’s FOMC projections of higher U.S. rates later this year, according to the report. In addition, equities received a boost after President Trump signed a preliminary deal aimed at ending the war in the Middle East, which reduced safe-haven demand for metals.
Despite the selloff, oil weakness offered a counter-argument for metals. With WTI falling to a 3.5-month low, the coverage said it lowered inflation expectations and could encourage central banks to pursue easier monetary policies, which is generally supportive for gold and silver.
ETF flows also added pressure. The report pointed to fund liquidation in precious metals: long holdings in gold ETFs fell to a 7.25-month low on Wednesday after reaching a 3.5-year high on February 27. Long holdings in silver ETFs fell to a 10.5-month low on Monday from a 3.5-year high set on December 23. Still, it noted ongoing support from central bank demand, including news that bullion held in China’s PBOC reserves rose by 320,000 ounces to 74.96 million troy ounces in May, the largest monthly increase in 17 months and the nineteenth straight month of PBOC gold buying.
Bigger picture: rates remain the main transmission channel
Data and policy expectations continue to shape the dollar’s direction, with oil acting as a secondary driver through inflation expectations. The report also underscored how different central banks are moving in different narratives: the Fed’s outlook is supporting the dollar, while the ECB’s messaging is keeping euro risk premiums closer to hawkish territory, and the BOJ’s path remains more uncertain.
For investors in commodities and FX, the near-term mix appears defined by three cross-currents: U.S. rate expectations following the FOMC, energy-driven inflation signals from crude prices, and shifting demand for safe-haven assets as equities trend higher.
What to watch next: Attention is likely to stay on further central bank signals and upcoming U.S. and global economic data that can shift the projected rate path. Markets will also be focused on the next scheduled policy decisions for the Fed, ECB, and BOJ—especially as oil and inflation expectations continue to move in tandem.
