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US dollar declines on jobless claims report

 

Friday, June 09, 2023

Today’s headlines

What’s happening: The US dollar moved lower on Thursday, following the release of the country’s jobless claims data.

What happened: US initial jobless claims rose higher than expected in the latest week.

The EUR/USD forex pair climbed on Thursday, despite data showed the Eurozone economy shrinking in the first three months of 2023.

Why it matters: The US Labor Department said the number of people filing for unemployment benefits rose by 28,000 to 261,000 in the week ended June 3, reaching the highest level since October 2021. The figure was also higher than market expectations of 235,000. The latest reading marked the third straight week of increase in jobless claims.

The US dollar had remained elevated due to growing speculations of the Federal Reserve hiking increase rates at its meeting in July. The central bank is widely expected to keep rates unchanged at its upcoming meeting in June.

Weakness in the economy and the banking crisis are likely to limit the number of Fed rate hikes despite inflation remaining high. The Consumer Price Index in the US rose 0.4% in April, after rising just 0.1% in March.

The Reserve Bank of Australia and the Bank of Canada have also raised their interest rates this month.

The EUR/USD forex pair gained around 0.8% to reach 1.0785 on Thursday, despite a decline in the Eurozone’s GDP. The Eurozone economy contracted by 0.1% in the first quarter, versus flash estimates of 0.1% growth. The European Central Bank is likely to increase interest rates by 25 bps at its meeting next week.

The USD/JPY pair also slid around 0.9% to 138.92.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.7% to 103.34 on Thursday, after hitting its highest level since March 15 last week.

What to watch: Traders will watch the consumer inflation report and Federal Reserve’s interest rate decision, due next week. Inflation data, scheduled for release a day before the Fed decision, is expected to influence the central bank’s monetary policy.

The annual inflation rate in the US is expected to ease to 4.7% in May, from 4.9% in April, while the CPI is projected to increase 0.3% in May, following a 0.4% rise in April.

The markets today

Asia-Pacific stocks will be in focus today ahead of major economic data due next week

Context: Markets in Asia Pacific closed mixed on Thursday, with investors assessing economic data released this week.

Details: Asian stocks remained under some pressure on Thursday amid concerns around rising interest rates and slowing economic growth. However, optimism around further stimulus measures in China sent the region’s stocks higher on Thursday.

China released disappointing trade data, which showed weakness in local and overseas demand. China’s trade surplus narrowed to $65.81 billion in May, from $78.40 billion in the year-ago period. The figure also came below market estimates of $92 billion. Imports to China fell by 4.5% year-over-year to $217.69 billion, while exports from the country contracted by 7.5% year-over-year to a three-month low of $283.5 billion in May.

However, prospects of further stimulus measures from Beijing and reports that China’s biggest state-owned banks had reduced interest rates on yuan deposits sent Chinese stocks higher on Thursday. China’s Shanghai Composite Index gained 0.49% to 3,213.59.

Australia stocks moved lower for the third consecutive session, after the country’s trade surplus declined more than expected in April. Australia’s trade surplus shrank to A$11.16 billion in the month, from A$14.82 billion in March, and came in below market estimates of A$14 billion.

Data released on Wednesday had shown Australia’s economy expanding by 0.2% in the first quarter, the slowest growth rate in six quarters. The country’s central bank also increased interest rates this week.

The Japanese economy expanded by 2.7% on an annualised basis in the first quarter, versus a preliminary reading of 1.6% growth and topping market estimates of 1.9% growth. However, Japan’s Nikkei 225 fell 0.85% to settle at 31,641.27 on Thursday.

Hong Kong’s Hang Seng Index rose 0.25%, while India’s BSE Sensex slipped 0.47%.

What are expectations: Traders await the release of major economic reports next week, including the PPI, balance of trade and interest rate decision from Japan.

WPI inflation data from India, employment data from Australia, retail sales, unemployment rate and industrial production data from China will also remain in focus.

Other Markets: European indices closed mixed on Thursday, with the FTSE 100 and STOXX Europe 600 Index down by 0.32% and 0.02%, respectively, and the DAX 40 and CAC 40 up by 0.18% and 0.27%, respectively.

The news shaping the markets

At a joint press conference, US President Joe Biden and UK Prime Minister Rishi Sunak reiterated their commitment to provide help to Ukraine in its war with Russia. The news sent the RUB/USD sharply lower in forex trading this morning.


China’s annual inflation rate accelerated to 0.2% in May, from April’s 26-month low of 0.1%, exerting pressure on the CNY/USD forex pair.


The Philippines reported a decline in its unemployment rate to a four-month low of 4.5% in April, from 5.7% in the year-ago month, sending the PHP/USD pair higher in forex trading this morning.


Argentina’s industrial production rose 1.7% year-over-year in April, slowing from the 3.5% growth reported in the previous month, which exerted pressure on the ARS/USD forex pair.


US wholesale inventories fell 0.1% in April, lower than the estimate of a 0.2% decline, which sent the Nasdaq 100 index higher by more than 1% on Thursday.

What else to watch today

Turkey’s industrial production, Italy’s industrial production, Russia’s inflation rate and Central Bank of Russia’s interest rate decision, India’s foreign exchange reserves, Mexico’s industrial production, Canada’s unemployment rate and employment change, US Baker Hughes crude oil rigs, Spain’s consumer confidence indicator, as well as Brazil’s Federal tax revenues.


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