US dollar undermined by jump in jobless claims

Philip McHugh November 17th 2023 - 2 minute read

The US dollar traded in a wide range on Thursday after its initial gains were reversed, amid further signs that the US labour market is slowing.

Meanwhile, the pound if off to a poor start so far this morning, with GBP/EUR dipping to €1.1421 and GBP/USD dropping to $1.2377. GBP/CAD has slipped to CA$1.7034, while GBP/AUD retreats to AU$1.9144 and GBP/NZD is muted at NZ$2.0806.

Coming up, will a surprise slump in UK retail sales figures leave Sterling to close the week on a sour note?

What’s been happening?

The US dollar initially firmed during yesterday’s European trading session as a gloomy market mood bolstered demand for the safe-haven currency.

However, the ‘greenback’ subsequently walked back these gains with the release of the latest US initial jobless claims.

Last week’s data showed a larger-than-expected rise in new unemployment claims. This further undermined Federal Reserve interest rate expectations and left USD to close the session lower.

The euro’s negative correlation with the US dollar in addition to the downbeat mood helped the single currency to move higher on Thursday.

At the same time, the pound was left to trade sideways as the risk-off mood offset some hawkish comments from Bank of England (BoE) policymaker Megan Greene.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest retail sales data.

Today’s figures reported sales growth slumped by 0.3% in October. While this was up from the 1.1% contraction recorded in September, it fell short of expectations for a 0.3% expansion. This is stoking UK recession fears, leaving the pound on the back foot this morning.

A speech by European Central Bank (ECB) President Christine Lagarde could inject some volatility into the euro this morning, depending on whether she touches on monetary policy.

Also of note to EUR investors will be the Eurozone’s latest inflation print. Will confirmation that inflation slowed to a two-year low limit the euro’s upside potential?

Meanwhile, in the absence of any notable US data, movement in the US dollar may be tied to market risk dynamics. Could a cautious mood see investors favour the ‘greenback’?

Written by
Philip McHugh

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