US Dollar Struggles Amid Market Rally, Jobless Claims Sliding to Three-Week Low

The US dollar slipped against many of its major currency rivals on Thursday, with market euphoria returning to the equities arena following the biggest one-day drop since October. This comes as initial jobless claims fell to a three-week low, and US economic growth slowed in the fourth quarter. So far in 2021, the greenback has exceeded expectations, but can the international reserve currency maintain its momentum heading into February?

According to the Bureau of Labor Statistics (BLS), the number of Americans filing for first-time unemployment fell to 847,000 in the week ending January 23, coming in less than the market forecast of 875,000. This is the lowest reading in three weeks.
Continuing jobless claims totaled 4.771 million, lower than the median estimate of 5.054 million. The four-week average, which eliminates the week-to-week volatility, jumped to 868,000.
When you factor in the additional 426,858 applications filed through a temporary federal-relief program, the government received 1.3 million applications. The combined claims have yet to slide below one million per week since the start of the pandemic.
Initial jobless claims increased the most in Florida and Illinois, and new applications dropped the most in California, Massachusetts, Pennsylvania, and Texas.
In other data, the Bureau of Economic Analysis (BEA) reported that the US economy expanded at an annualized rate of 4% in the fourth quarter, a massive decline from the 33.4% growth in the third quarter. The report’s biggest revelations were business and housing investment remaining resilient, exports surging at a double-digit pace, and public expenditures and personal consumption sliding.
Overall, the US economy contracted 3.5% in 2020, the worst annual performance since 1946. It was slightly better than the market forecast of 3.6%.
In December, wholesale inventories edged up 0.1%.
On Wednesday, the Federal Reserve completed its two-day Federal Open Market Committee (FOMC) January meeting. The central bank left interest rates and the aggressive asset-purchasing program unchanged. Fed Chair Jerome Powell suggested that tapering monetary policy is not in the cards, noting that it is prepared to extend additional support to survive these trying times.
Powell argued that the most important aspect of the US economy is getting the public vaccinated. If not, the Fed Chair explained, the national economy would continue to be affected by the COVID-19 public health crisis.

The whole focus on exit is premature if I may say. We’re focused on finishing the job we’re doing, which is supporting the economy, giving the economy the support it needs. Should the economic recovery slump, Powell said the Fed is willing to do more.

Despite promising immediate fiscal stimulus, it looks like the US government will not be passing President Joe Biden‘s $1.9 trillion stimulus proposal for another six weeks, according to Senate Majority Leader Chuck Schumer (D-NY).
The bond market was mostly in the green on Thursday, with the benchmark 10-year bond rising 0.029% to 1.043%. The one-year note dipped 0.005% to 0.86%, while the 30-year bond jumped 0.024% to 1.804%.
The US Dollar Index, which measures the greenback against a basket of currencies, slumped on Thursday, sliding 0.18% to 90.48. The greenback has performed well in 2021, defying market forecasts and rising 0.6% in the first month of the calendar yar.
The USD/CAD currency pair edged up 0.09% to 1.2817, from an opening of 1.2803, at 14:08 GMT on Thursday. The EUR/USD jumped 0.18% to 1.2136, from an opening of 1.2111.
If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

Original from: www.earnforex.com