Dollar Surge Hits Yen, Chip Stocks Slide

The US dollar surged to a new high against the yen, surpassing 159 yen, driven by the Federal Reserve's relatively hawkish stance compared to other central banks. Asian markets, including Japan's Nikkei, showed little support, with chip stocks being sold off widely. FTSE, DAX, and STOXX 600 may face declines after gains earlier this week.

Equities

The FTSE 100 hit a near two-week high, rising 0.8%, supported by the Bank of England's decision to keep interest rates steady at 5.25%. This decision boosted market expectations of a potential rate cut in August. The FTSE 250 also gained 0.6%. The pound's 0.4% dip further aided the exporter heavy FTSE 100.

Among UK companies, Ocado saw its shares tumble 12% after its Canadian partner paused the opening of a Vancouver warehouse. Meanwhile, CMC Markets surged nearly 12.8%, forecasting higher operating income in 2025. Tate & Lyle dropped 9% following a $1.8 billion deal to buy US based CP Kelco, with shares also trading ex-dividend.

The Dow Jones Industrial Average rose 0.77% to 39,134.96, while the S&P 500 fell 0.25% to 5,473.22, and the Nasdaq Composite dropped 0.79% to 17,721.59. Nvidia, leading the AI driven rally, reversed morning gains, ending down about 2%.

European stocks were boosted by tech and real estate sectors, with the STOXX 600 rising 0.93% and the FTSEurofirst 300 up 0.90%. Swiss equities rallied after the Swiss National Bank's interest rate cut. The MSCI's global stock index hit a record high but closed slightly lower.

Forex & Commodities

The US dollar reached an eight-week high against the yen, surpassing 159 yen, and hovered near a five-week peak against sterling. The dollar index rose 0.41% overnight, driven by a rate cut from the Swiss National Bank and hints of a future reduction from the Bank of England. The dollar stood at 158.875 yen, slightly off its earlier high of 159.12, and remained stable at 0.8909 Swiss franc. Sterling traded at $1.26635, close to its recent low.

US Treasury yields climbed as investors anticipated new supply. The 10-year note yield rose to 4.254%, and the 30 year bond yield increased to 4.3908%. The dollar firmed, approaching the 160 yen mark, prompting concerns about potential intervention from Tokyo. The dollar index rose 0.4% to 105.63, while the euro and sterling fell against the dollar, with the latter hitting a five week low at $1.2662.

Gold prices were set for a second consecutive weekly gain, rising 0.1% to $2,362.60 per ounce, driven by safe-haven demand amid Middle East tensions and expectations of US rate cuts. US gold futures also increased by 0.3% to $2,376.50. Economic data showing a moderate fall in US unemployment claims and a drop in housing construction supported the case for potential rate cuts, benefiting gold.

Brent crude futures for August dipped 15 cents to $85.56 a barrel, while US West Texas Intermediate crude futures fell 14 cents to $81.15 per barrel. Despite the slight dip, oil prices were on track for a second week of gains due to signs of improving demand and falling US oil and fuel inventories.