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US Dollar Quiet Ahead of Thanksgiving As Investors Assess Data, FOMC Minutes

November 25, 2020 at 20:05 by Andrew Moran

One cent coin stands on 100 dollar notesThe US dollar is trading relatively flat against multiple major currency peers, mainly due to the plethora of mixed economic data that were released ahead of the American Thanksgiving holiday. In focus in the middle of the holiday-shortened trading were jobs and personal income and spending. With a subdued greenback on Wednesday, what comes next on the other side of annual festivities and in the home stretch of 2020?

According to the Department of Labor, the number of Americans filing for first-time unemployment benefits came in at a five-week high of 778,000. The market had penciled in a reading of 730,000. Last week, initial jobless claims totaled 748,000.

Continuing jobless claims remained above six million, while the four-week average hit 748,500.

The federal government also reported that another 311,657 people applied for benefits through a federal-relief program that is set to expire at the end of the year. So, when the number of new state and federal jobless claims are combined, the weekly figure has yet to slide below one million.

According to the Bureau of Economic Analysis (BEA), personal income slumped by 0.7% in October, down from a 0.7% jump in September. Personal spending, the BEA reported, rose 0.5% last month, down from a 1.2% gain in September.

Durable goods orders rose 1.3% in October, beating the median estimate of 0.9%. It is down from 2.1% in September, but it represents the sixth consecutive monthly gain, driven by increases in orders for transportation equipment, capital goods, non-defense capital goods, and computers and electronics.

Wholesale inventories advanced 0.9% in October, while the goods trade balance recorded a deficit of $80.29 billion. Corporate profits surged 27.5% in the third quarter.

In the second estimate from the BEA, the US economy expanded by an annualized 33.1% in the July-to-September period, matching the advance estimate. This is the biggest gross domestic product (GDP) expansion ever, and it is also way up from the 31.4% second-quarter collapse.

On the housing front, mortgage applications advanced 3.9% in the week ending November 20, notes the Mortgage Bankers Association (MBA). The 30-year mortgage rate fell to 2.92% in the same week. The US Census Bureau confirmed that new home sales slid 0.3% to a seasonally-adjusted annual rate of 999,000 in October.

Finally, the University of Michigan’s consumer expectations final reading for November came in at 70.5, down from 79.2 last month. Consumer sentiment dropped to 76.9, while current conditions edged up to 87.0. Its present inflation expectations rose to 2.8%, and the five-year inflation expectations figure jumped to 2.6%.

The Federal Reserve released minutes from its November Federal Open Market Committee (FOMC) policy meeting. The minutes revealed that the central bank had considered modifying its bond purchases to offer more assistance to the national economy “fairly soon.”

Participants noted that the Committee could provide more accommodation, if appropriate, by increasing the pace of purchases or by shifting its Treasury purchases to those with a longer maturity without increasing the size of its purchases. Alternatively, the Committee could provide more accommodation, if appropriate, by conducting purchases of the same pace and composition over a longer horizon.

Officials inside the Eccles Building were concerned about the strength and pace of the economic recovery, noting that growth was way below pre-pandemic levels.

Ultimately, investors had wanted to see if the Fed would increase or alter its unlimited asset-buying scheme. Following this month’s press conference, Fed Chair Jerome Powell assured markets that the institution still had ample ammunition to stimulate and support the economy.

The financial markets are taking a bit of a breather on Wednesday after recording record highs and as investors take some profits heading into Thanksgiving. Bonds were mostly mixed, with the benchmark 10-year Treasury dipping 0.04% to 0.878%. The one-year note was flat at 0.107%, while the 30-year bond jumped 0.014% to 1.617%.

The US Dollar Index, which gauges the greenback against a basket of currencies, tumbled 0.24% to 92.00, from an opening of 92.23. The index is poised for a weekly loss of 0.3%, adding to its year-to-date decline of more than 4.5%.

The USD/CAD currency pair rose 0.02% to 1.3002, from an opening of 1.2999, at 18:50 GMT on Wednesday. The EUR/USD increased 0.1% to 1.1918, from an opening of 1.1894.

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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