US unemployment claims have increased, but the US dollar remains strong due to expectations of high Fed interest rates.
The US dollar rebounded in New York trading on Friday (5/10/2024) after a slump following the release of yesterday's unemployment claims data. The US Dollar Index (DXY) held steady around 105.30, while the greenback outperformed in most major pairs.
Last week's weekly unemployment claims data showed an increase of 231k, more than the previous week's figure of 209k, and the consensus estimate pegged at 212k.
This is a sign of further weakening in the US labor market, in line with the poor Nonfarm Payroll report last week. However, the US dollar only weakened modestly because expectations of Fed interest rates remain very high.
Consolidation phase was observed in several major pairs, including USD/JPY and GBP/USD, which were the main focus this week. USD/JPY is still held back by the hawkish statement from the Bank of Japan yesterday below the 156.00 threshold. GBP/USD was initially hit by the dovish stance of the Bank of England but stabilized by the upbeat UK economic growth report in Q1/2024.
Market participants are now awaiting the publication of several US inflation data next week, especially the Consumer Price Index (CPI) and the Producer Price Index (PPI). If the data confirm a continued downward trend in inflation towards the 2% target, expectations of Fed interest rate cuts could heat up again and hit the US dollar. Conversely, indications of persistently high inflation could support the greenback.
The US dollar rebounded in New York trading on Friday (5/10/2024) after a slump following the release of yesterday's unemployment claims data. The US Dollar Index (DXY) held steady around 105.30, while the greenback outperformed in most major pairs.
Last week's weekly unemployment claims data showed an increase of 231k, more than the previous week's figure of 209k, and the consensus estimate pegged at 212k.
This is a sign of further weakening in the US labor market, in line with the poor Nonfarm Payroll report last week. However, the US dollar only weakened modestly because expectations of Fed interest rates remain very high.
"They are still offering the highest interest rates in the G10 space. So, along with low volatility, it indicates that the US dollar will remain supported," said Alvin Tan, Head of FX Strategy Asia at RBC Capital Markets, as quoted by Reuters, "(This situation) will be more range-trading unless we see a surprise."
Consolidation phase was observed in several major pairs, including USD/JPY and GBP/USD, which were the main focus this week. USD/JPY is still held back by the hawkish statement from the Bank of Japan yesterday below the 156.00 threshold. GBP/USD was initially hit by the dovish stance of the Bank of England but stabilized by the upbeat UK economic growth report in Q1/2024.
Market participants are now awaiting the publication of several US inflation data next week, especially the Consumer Price Index (CPI) and the Producer Price Index (PPI). If the data confirm a continued downward trend in inflation towards the 2% target, expectations of Fed interest rate cuts could heat up again and hit the US dollar. Conversely, indications of persistently high inflation could support the greenback.