The US dollar steadied Friday, trading near a one-month high after stronger-than-US jobless claims allayed fears of a looming recession in the world’s largest economy.
At 04:15 ET (09:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded essentially unchanged at 103.007, not far from levels seen before Friday’s labour market release.
Initial Jobless Claims Fall, Allaying Fears of a Hard Landing
Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Aug. 3, data showed on Thursday, the most significant drop in about 11 months.
This helped allay fears that the US economy was heading for a hard landing and that the Federal Reserve, with its decision not to cut rates late last month, was behind the curve.
“The abnormally large reaction to jobless claims figures yesterday was a testament to markets’ extremely elevated sensitivity to all sorts of indications on the US macro outlook right now,” said analysts at ING in a now.
Next week, attention will turn to the latest consumer price report as traders seek more guidance on the Fed’s likely future actions.
“We can reasonably expect the market reaction to next week’s US core CPI numbers to be significant even for small (second decimal of a percentage point) deviations from the consensus 0.2% MoM,” added ING.
The odds of the Federal Reserve cutting interest rates by 50 basis points at its next policy meeting are just above 50%, with a 25 basis point cut now seen as having a 46% probability.
Eurozone Economic Update
In Europe, EUR/USD slipped slightly to 1.0917, having soared as high as 1.1009 at the start of the week, the first time since Jan. 2.
EUR/USD 4-hour chart
The European Central Bank started cutting interest rates in June, and many expect the policymakers to agree to another reduction in September.
Italian EU-harmonised consumer prices fell 0.9% month-on-month in July. They were up 1.6% from the year earlier, suggesting inflationary pressures were limited in the eurozone’s third-largest economy.
GBP/USD rose 0.2% to 1.2768, continuing the 0.5% rally overnight, yanking it back from a more than one-month low.
GBP/USD 4-hour chart
However, it remained on course for small losses this week, a fourth straight week of declines.
USD/JPY & USD/CNY Movements
In Asia, USD/JPY fell 0.1% to 147.20, but it was trading well above the lows of around 141.60 earlier in the week.
USD/JPY 4-hour chart
The yen’s turnabout came as BOJ officials said they would not hike interest rates during market volatility, tempering a hawkish message from the central bank during an end-July meeting.
But despite weakening this week, the yen still enjoyed stellar gains against the dollar over the past month, especially as the global carry trade began to unwind.
USD/CNY edged lower to 7.1739, with the yuan helped by data showing the Chinese consumer price index grew more than expected in July while the producer price index inflation fell slightly less than expected.
