Aug 9 2024: The U.S. dollar held steady on Friday, trading close to a one-month high, following stronger-than-expected jobless claims that eased recession fears in the world’s largest economy.
At 04:15 ET (09:15 GMT), the Dollar Index, which measures the greenback against a basket of six other currencies, remained stable at 103.007, not far from levels seen before the recent labor market report.
Dollar Stabilizes After Recent Volatility
Initial claims for state unemployment benefits dropped by 17,000 to a seasonally adjusted 233,000 for the week ending August 3, marking the largest decrease in about 11 months. This decline helped mitigate concerns that the U.S. economy might face a severe downturn and that the Federal Reserve’s decision not to cut rates last month was misplaced.
“The significant market reaction to jobless claims figures reflects the current heightened sensitivity to any indications about the U.S. economic outlook,” noted analysts at ING.
Next week, attention will shift to the latest consumer price index (CPI) data, with traders eager for further insights into the Federal Reserve’s potential future actions. “Even small deviations from the consensus 0.2% month-on-month increase in U.S. core CPI could trigger substantial market reactions,” ING added.
Current probabilities suggest a greater than 50% chance that the Federal Reserve may cut interest rates by 50 basis points at its upcoming policy meeting, with a 25 basis point reduction now considered a 46% likelihood, according to CME Group’s FedWatch Tool.
European and Asian Currency Movements
In Europe, the EUR/USD slipped slightly to 1.0917, having previously reached 1.1009, its highest since January 2. The European Central Bank’s recent rate cuts have bolstered the euro, with expectations of further reductions in September.
Italian EU-harmonized consumer prices fell by 0.9% month-on-month in July and increased by 1.6% year-on-year, indicating limited inflationary pressures in Italy.
GBP/USD increased by 0.2% to 1.2768, recovering from a more than one-month low. However, the pound is still on track for small losses this week, marking a potential fourth consecutive week of declines.
In Asia, USD/JPY fell 0.1% to 147.20, though it remained well above earlier lows of around 141.60. The yen’s stability was influenced by comments from BOJ officials indicating no immediate rate hikes during periods of market volatility, despite earlier hawkish signals. The yen has gained significantly against the dollar over the past month, partly due to the unwinding of the global carry trade.
USD/CNY edged down to 7.1739, supported by data showing a stronger-than-expected growth in China’s consumer price index for July, while the producer price index inflation decreased slightly less than anticipated.
