High unemployment sends US dollar lower as traders flock to gold

Data current as of 3/8/2024

Key points

• Unemployment highest in two years: (0:40)
• Fed could cut interest rates in June: (1:55)
• USD softens on potential rate cuts: (3:28)
• Gold prices hit new highs near $2,200: (4:52)
• US inflation data coming: (6:17)

Unemployment highest in two years

The US unemployment rate reached 3.9% in February, marking the highest point since January 2022 and surpassing the expected rate of 3.7%. This uptick in unemployment underscores challenges in the job market, potentially signaling a shift in economic momentum. In recent months, the unemployment rate has failed to cause concern, appearing stable at 3.7%.

Fed could cut interest rates in June

The recent rise in unemployment could prompt the Federal Reserve to consider cutting interest rates at the June FOMC meeting. Central banks closely watch employment and inflation indicators to guide their monetary policy decisions. A rate cut could be seen as a move to stimulate economic growth by making borrowing cheaper and encouraging spending and investment. Traders are closely monitoring these developments, as such decisions directly impact market dynamics.

USD softens on potential rate cuts

In anticipation of potential rate cuts by the Federal Reserve, the US dollar has weakened against major currency pairs. GBP/USD moved higher approaching 1.3000, and EUR/USD similarly neared 1.1000, reflecting investor sentiment towards softer US data. Currency traders are adapting their strategies in response to these trends, as shifts in US monetary policy can significantly affect forex market valuations.

Gold prices hit new highs near $2,200

Amid concerns over US economic data, gold prices surged, nearing $2,200 - an indication of the precious metal's status as a preferred flight-to-quality asset during times of uncertainty. Investors often flock to gold during periods of market volatility or weak economic performance, as it traditionally holds value better than other assets. This trend highlights gold's appeal in the current economic climate, exacerbated by concerns over US data.

US inflation data coming

The upcoming release of US CPI inflation data will be closely watched, as it could confirm or reverse the recent trend of weakness in the US dollar and influence interest rates. Accurate inflation data is crucial for understanding the Federal Reserve's next moves and the broader economic outlook. This release will be the Fed's final look at inflation before the March FOMC meeting.

How to trade US dollar

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.