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US Dollar Ends Winning Streak As Jobless Claims Fall to Three-Week Low

December 23, 2020 at 17:39 by Andrew Moran

Many different USD notes as a backgroundThe US dollar is ending its winning streak midweek amid renewed optimism in the broader financial markets. Despite concerns over a new strain of the coronavirus that appears to be more infectious, the investors were optimistic over initial jobless claims declining to their lowest levels in three weeks. But as long as the COVID-19 vaccines prove effective, traders will remain bullish on stocks, which is bad news for the dollar.

According to the Bureau of Labor Statistics (BLS), the number of Americans applying for unemployment benefits came in at 803,000 in the week ending December 19. This is lower than the median estimate of 885,000, and the reading is a drop from last week’s 892,000 applications.

Continuing jobless claims declined to 5.337 million, while the four-week average, which removes week-to-week volatility, topped 818,000.

In the same week, 397,511 applications for benefits from a federal-relief program were submitted. This brought the total number of new claims to 1.27 million. Since the COVID-19 public health crisis began, initial jobless claims have yet to slide below one million.

Meanwhile, the BLS stated in a separate announcement that it plans to introduce new measures to enhance the data’s reliability. Although the overall report is believed not to be perfectly accurate, market analysts say it is best to concentrate on the weekly report’s specifics rather than the totals.

Last month, the Government Accountability Office (GAO) published a report that found the numbers were inflated due to double counting, fraud, and other issues.

In other economic data, the Bureau of Economic Analysis (BEA) reported that personal income tumbled 1.1% in November, while personal spending slid 0.4%.

Durable goods orders advanced 0.9% last month, beating the market forecast of 0.6%. This represented the seventh consecutive months of new orders for US manufactured durable goods.

On the housing front, mortgage applications edged up 0.8% in the week ending December 18. The 30-year mortgage rate edged up one basis point to 2.86%. Also, housing prices increased by 1.5% in October, and new home sales plunged 11% in November to 841,000.

The US bond market was green across the board. The benchmark 10-year Treasury jumped 0.038% to 0.956%. The one-year note dipped 0.002% to 0.091%, while the 30-year bond surged 0.052% to 1.706%.

The US Dollar Index, which gauges the greenback against a basket of currencies, slumped 0.38% to 90.31, from an opening of 90.52. The index enjoyed a two-day rally of 0.3% before paring its gains. The DXY is poised to finish the year down around 6%, but it has cratered roughly 15% since hitting a peak of 103.00 at the height of the coronavirus-induced financial crisis.

Investors had been pouring into the greenback during the holiday-shortened trading week over the mutation of the coronavirus in the UK. The British government also discovered a second variant of the coronavirus from South Africa. So far, medical experts say that the three vaccines on the market should be efficacious against this new strain, but it might also be too early to tell.

The USD/CAD currency pair tumbled 0.51% to 1.2842, from an opening of 1.2909, at 16:30 GMT on Wednesday. The EUR/USD rose 0.27% to 1.2195, from an opening of 1.2163.

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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