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US Dollar Gains As Jobless Claims Hit Fresh Pandemic Low, Inflation Beats Estimates

November 12, 2020 at 15:12 by Andrew Moran

Some USD bills and US cent coinsThe US dollar is looking to maintain its momentum toward the end of the trading week, buoyed mostly by economic data rather than the broader market trends. The greenback is searching for support from lower-than-expected inflation and initial jobless claims falling to a fresh pandemic low. Could the buck travel on an upward trajectory to close out 2020?

According to the Department of Labor, the number of Americans filing for first-time unemployment benefits came in at 709,000 in the week ending November 7. This beat market forecasts of 735,000, and the reading is the lowest total figure since the coronavirus public health crisis began.

Continuing jobless claims fell to 6.786 million, while the four-week average topped 755,000.

It should be noted that nearly 300,000 people applied for benefits through a temporary federal-relief program that expires at the end of the year. When you calculate benefit applications for the eight federal and state programs, the number has yet to slide below one million per week.

With the number of new daily infections continually increasing, market observers fear that the already fragile labor market could remain vulnerable for the foreseeable future. Since one million people are still filing for jobless benefits, an intensifying COVID-19 pandemic might threaten any employment gains since the US economy began to reopen in May.

Last month, the annual inflation rate declined to 1.2%, coming in lower than the median estimate of 1.3%. This is well below the 2.3% reading in February. Month-over-month, prices were unchanged in October, down from the 0.2% boost in September. Health care, energy, and apparel led the overall decline in prices. Food (3.9%), shelter (2%), and automobiles (1.5%) continued to cost more.

The core inflation rate, which excludes volatile food and energy, climbed 1.6% year-over-year, reports the Bureau of Economic Analysis (BEA).

On Wednesday, the Mortgage Bankers Association (MBA) reported that mortgage applications dropped 0.5% in the week ending November 6. The 30-year mortgage rate fell below 3% for the first time on record.

The bond market drowned in a sea of red ink on Thursday. The benchmark 10-year Treasury slumped 0.075% to 0.914%. The one-year note dipped 0.002% to 0.122%, while the 30-year bond dropped 0.074% to 1.686%.

The US Dollar Index, which gauges the greenback against a basket of currencies, slid 0.05% to 93.00, from an opening of 93.01. The index is on track for a weekly gain of 0.51%, but it is still down 3.5% year-to-date.

The USD/CAD currency pair rose 0.55% to 1.3135, from an opening of 1.3064, at 14.07 GMT on Thursday. The EUR/USD advanced 0.18% to 1.1799, from an opening of 1.1780.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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