US Dollar Rises on Higher Treasury Yields, Jobless Claims

The US dollar bounced back from Wednesday’s loss, rallying on concerns in the broader financial markets and economy following the latest initial jobless claims. The greenback also jumped on the bump in Treasury yields, with investors anticipating higher inflation. Can the buck claw back from its recent weakness?

According to the Bureau of Labor Statistics (BLS), the number of Americans filing for unemployment benefits clocked in at 770,000 in the week ending March 13. This is higher than the market forecast of 700,000, and it is up from last week’s five-month-low reading of 725,000.
Continuing jobless claims slipped to 4.124 million, while the four-week average, which removes week-to-week volatility, topped 746,2500.
Also, an additional 282,394 applications were submitted for a temporary federal-relief program. When federal and state unemployment claims are combined, the weekly job figures have yet to decline below one million since the peak of the COVID-19 pandemic.
Texas had the biggest increase in jobless claims, surging by 21,000 to more than 70,000. This was followed by Illinois and Virginia. All the other states had little to no change.
Is this an aberration or the start of something more concerning? Most economists are optimistic that the US labor market will soar in the coming months due to warmer weather, economic reopenings, and ramped-up vaccine distribution. That said, the consensus is that once the coronavirus public health crisis subsides, a full jobs recovery can unfold.
On Wednesday, the Federal Reserve completed its two-day March Federal Open Market Committee (FOMC) policy meeting. The US central bank agreed to leave its benchmark interest rate unchanged and keep its quantitative easing (QE) program intact.
Fed Chair Jerome Powell dismissed that the institution would taper its aggressive monetary policy. Policymakers agree that a rate hike would not occur until either 2022 or 2023. The Fed also forecast gross domestic product (GDP) growth of 6.5% this year and then cool down to about 2% in 2022 and 2023. The Eccles Building anticipates inflation to jump to 2.59% within the next five years.

The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak.

Inflation continues to run below 2 percent. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.

In other data, the Fed Bank of Philadelphia’s manufacturing index soared to 51.8 in March, up from 23.1 in February. The Conference Board Leading Index edged up 0.2% last month.
The US bond market rallied on Thursday, despite the Fed’s dovish tone, with the benchmark 10-year yield surging 0.092% to 1.733%. The one-year bill jumped 0.006% to 0.074%, while the 30-year bond rose 0.041% to 2.479%.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, advanced 0.4% to 91.81, from an opening of 91.40. The index is poised for a weekly gain of around 0.4%, raising its year-to-date rally to more than 2%.
The USD/CAD currency pair climbed 0.32% to 1.2444, from an opening of 1.2407, at 15:08 GMT on Thursday. The EUR/USD fell 0.51% to 1.1921, from an opening of 1.1979.
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Original from: www.earnforex.com