Dollar Weaker Despite Sharp Drop In Jobless Claims

Dollar Weaker Despite Sharp Drop In Jobless Claims

Labor data is at the forefront of attention today, ahead of Friday’s release of the closely-followed Employment Situation report and after the latest jobless claims report showed a marked improvement for last week.  

Dollar Weaker Despite Sharp Drop In Jobless Claims
Dollar Weaker Despite Sharp Drop In Jobless Claims

With the financial markets mostly shut for Good Friday, it is a slightly unusual situation that such an important economic indicator as the Employment Situation is being kept to its usual release slot of the first Friday of the month; there will be an abbreviated futures trading session, but with volumes usually light on public holidays, we could be in for a volatile ride.

The number of first-time claimants for unemployment insurance fell 20,000 last week to 268,000, one of the lowest levels seen in the last 15 years and a much more positive result than had been anticipated which hauls the four-week moving average to an impressively low 285,500, from 300,250 in the week prior. There may be some caution over just how good these numbers are, given that we are so close to Easter, a holiday that moves around year to year and for which it is therefore difficult to make seasonal adjustments, but even so the numbers are sufficiently upbeat to work to counter concerns ahead of Friday’s payrolls data, expectations for which were dented by weakness in Wednesday’s private payroll estimate from ADP.

The ADP data gauged private payroll growth at 189,000 for March, substantially lower than the 214,000 ADP reported for February. ADP’s data has not correlated tightly with the official data for many months (for example, the Bureau of Labor Statistics reported February private payroll growth of 288,000), but the magnitude by which March’s ADP report missed expectations (the consensus was for 230,000) will nonetheless be causing some anxiety.

February’s non-farm payrolls growth came in at 295,000, but that number is expected to decline to 247,000, while the unemployment rate is expected to remain unchanged at 5.5%.

Stock prices on Wall Street opened little changed on Thursday, following declines in the two previous trading sessions. Shortly after the open, the Dow Jones was up 15 points or 0.09% at 17,713.

In the forex market, the euro strengthened sharply against the dollar. Despite the upbeat jobless claims number, the tenor of the most recent US economic news has been discouraging, particularly yesterday’s ISM manufacturing index, which slid to its lowest level in almost two years in March.

The manufacturing sector has been hit by the strength of the dollar, a factor that will not have gone unnoticed by the Fed. EUR/USD was up 0.97% at 1.0864 by 09.30 in New York.

The euro was also supported by the release of the minutes from the last ECB meeting.  Though the minutes didn’t contain any surprise revelations, it did clarify that further interest rate cuts are not up for discussion, saying ‘Caution was expressed in view of some market perceptions that the deposit rate could fall below minus 20 basis points, which, it was affirmed, should be regarded by the Governing Council as the effective lower bound.’

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