US Dollar Tests Three-Year Low on Higher Initial Jobless Claims, Federal Relief

The US dollar extended its bearish pattern against many of its major currency counterparts on Thursday. The US government reported a larger-than-expected increase in the number of Americans filing for unemployment benefits. The buck was also hammered on the growing odds of another round of COVID-19 stimulus and relief spending to cushion the economic blows from the public health crisis.

According to the Bureau of Labor Statistics (BLS), initial jobless claims climbed to a four-month high of 885,000 in the week ending December 12. The market had anticipated a reading of 800,000. Last week, the number of Americans filing for unemployment benefits reached 862,000.
The biggest increase in initial claims was in California and Illinois, which is not surprising considering the coronavirus resurgence and the various government restrictions placed on businesses.
Continuing jobless claims fell to 5.508 million, while the four-week average, which removes week-to-week volatility, topped 812,000.
The employment situation worsened when more than 455,000 applications submitted through a temporary federal-relief program are added to the mix. Overall, jobless claims remain above one million. These benefits are set to expire at the end of the year unless lawmakers take action, but federal relief could be on the way as Congress is on the cusp of approving more federal assistance for struggling businesses and jobless workers, including direct-income support payments.
In other data, housing starts rose 1.2% in November, down from the 6.3% jump in October, to 1.547 million. Building permits surged 6.2% last month, up from -0.1% in October, to 1.639 million. The Federal Reserve Bank of Philadelphia‘s manufacturing index tumbled to 11.1 this month, down from 26.3 in November.
In Fed news, the US central bank completed its two-day Federal Open Market Committee (FOMC) policy meeting on Wednesday. It left interest rates unchanged and it confirmed that it would continue its enormous corporate and government bond-buying program to support the economic recovery. The Fed encouraged a trifecta of stimulus spending from the Eccles Building, Congress, and the White House. Fed Chair Jerome Powell also raised its economic outlook by just 0.2% to 4.2%, but it predicted that the unemployment rate would slide to 5%.
The greenback extended its weakness on Thursday. The US Dollar Index, which gauges the greenback against a basket of currencies, plunged 0.67% to 89.84, from an opening of 90.27. The index is on track for a weekly loss of more than 1%, bringing its year-to-date decline to nearly 7%.
The USD/CAD currency pair dropped 0.33% to 1.2703, from an opening of 1.2747, at 13:50 GMT on Thursday. The EUR/USD rose 0.44% to 1.2255, from an opening of 1.2200.
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Original from: www.earnforex.com