US stocks strengthen, dollar fades as US Fed sees gradual tightening

Yields on 10-year US Treasuries nursed their heaviest falls since last August. The weak readings for inflation expectations increased speculation that the Federal Reserve would be deterred from raising interest rates aggressively.

The dollar fell 1 percent against a basket of key currencies and hit a five-week low against the euro.

The latest COT positioning data, released late on Friday, will be a significant focus to assess investor gold positioning just ahead of the Federal Reserve interest rate decision.

"Lower rates, higher equities and a lower dollar all point to this being interpreted as more dovish than what was expected", said Randy Frederick, vice president Of trading and derivatives for Charles Schwab in Austin, Texas.

"Global equities are positive, albeit just, as we head towards another USA rate hike and potential for further populist, anti-immigration backlash, this time from the Netherlands", said Mike van Dulken, head of research at Accendo Markets.

It was the same sentiment in Europe, where the benchmark Stoxx Europe 600 index ( traded at its highest since December 2015.

In response, the U.S. currency weakened after the release with USD/JPY dipping below 113.00 and the dollar index edged back to the 10.00 area. The Nasdaq .ixic was flat, while the Dow .dji and the S&P 500 .spx posted losses.

The US unit bought 113.23 yen Thursday, down from Wednesday in NY and well off the levels above 115 yen touched earlier this week.

By contrast, the euro was mostly unruffled by the result of the Dutch election Thursday morning, even after preliminary results backed up the earlier exit polls, showing that Prime Minister Mark Rutte had held off the challenge of far-right rival Geert Wilders. The British pound sterling approached $1.24 as London's FTSE 100 outpaced its continental counterparts, advancing 0.4% by 9:30 am EST.

The economic calendar for the rest of the day is quite busy, with two central bank meetings - Bank of England and Swiss National Bank - and key economic data on Eurozone inflation and USA jobless claims.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Oil futures extended gains after climbing for the first time in a week on Wednesday on data showing a surprise drawdown in USA crude inventories. Benchmark Brent settled up 1.8 percent to $51.81 a barrel.

U.S. crude rose 1.9 per cent to $48.64 a barrel, after touching a three-month low a day earlier, while benchmark Brent gained 1.8 per cent to $51.82 a barrel.

Silver was up 0.4% at $17.35 an ounce, while platinum gained 0.4% to $957.75 and palladium advanced 1.5% to $775.60.

  • Leroy Wright