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US Dollar Index Finds Support on Five-Month High Jobless Claims, Stimulus Hopes

January 14, 2021 at 15:00 by Andrew Moran

A heap of USD notes and a heap of US centsCould the US dollar maintain its impressive start to 2021 on Thursday? Investors sought refuge from bearish data and economic uncertainty after the federal government reported the higher number of initial jobless claims in about five months. Financial markets are also waiting for President-Elect Joe Biden‘s stimulus and relief proposals, with only days until he is inaugurated.

According to the Bureau of Labor Statistics (BLS), the number of Americans filing for first-time unemployment benefits came in at 965,000 in the week ending January 9. This the highest reading since August.

Continuing jobless claims reached 5.271 million, while the four-week average, which eliminates week-to-week volatility, topped 834,000.

Another 284,470 applications were submitted through a temporary federal-relief program. Also, when you factor in additional federal and state claims, the government received 1.44 million applications. Once again, combined claims have yet to fall below one million since the beginning of the pandemic.

Despite rolling out vaccines, the country continues to be hammered by the coronavirus. With two new variants being discovered in the US, officials fear that there could be an explosion of infections over the next couple of months. Daily cases have already topped 200,000, bringing the total number of cases to more than 23.1 million, with a death toll of 385,000.

That said, are these job numbers accurate? Last year, the Government Accountability Office (GAO) stated in a report that the weekly data is inflated. Economists also note that the federal government’s monthly jobs report highlighted a smaller number of unemployed Americans.

Overall, the labor numbers could worsen in the first quarter of 2021 as the second wave of the COVID-19 public health crisis intensifies. And this is part of the reason why investors are encouraging an increase in stimulus spending, which could be announced by the incoming administration soon. Biden has said that his proposal would come with a price-tag in the trillions, noting that if his White House did not act immediately, the country would be in a deeper hole that would be hard to escape.

In other data, import prices climbed 0.9% in December, while export prices surged 1.1% last month.

The US bond market was mixed on Thursday. The benchmark 10-year Treasury edged up 0.011% to 1.099%. The one-year note dipped 0.002% to 0.09%, while the 30-year bond picked up 0.014% to 1.832%. Treasurys have been off to a hot start in 2021, buoyed by inflation concerns.

The US Dollar Index, which measures the greenback against a basket of currencies, jumped 0.17% to 90.51, from an opening of 90.28. The DXY has defied market expectations so far in the first two weeks of trading, rising nearly 0.7%. Despite the number of short positions heading into the new year, the greenback has been trending upward due to political uncertainty, disappointing economic data, and rising Treasurys.

The USD/CAD currency pair slumped 0.11% to 1.2684, from an opening of 1.2705, at 12:42 GMT on Thursday. The EUR/USD tumbled 0.33% to 1.2120, from an opening of 1.2156.

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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