Highest US Jobless Claims since August sends US dollar, rates lower

Key points

• Weekly Jobless Claims beat expectations at 231k
• This comes after Unemployment rate rose to 3.9% last week
• US dollar fell against all major currencies throughout the trading day Thursday
• The yield on the 10-Year Treasury fell below 4.5%
• Markets anticipating the Fed's first rate cut to come in September

Weekly Jobless Claims soared to 231,000

The US witnessed a significant rise in weekly jobless claims this morning, spiking to 231,000—21,000 more than expected and the highest since August. This surge suggests a possible shift in the labor market, underscoring the importance of monitoring such economic indicators for trading strategies, especially as they might affect the Federal Reserve's decisions on interest rates, which in turn influences the forex market.

Unemployment rate rose to 3.9%

Last Friday, the unemployment rate edged up to 3.9% against expectations that it would remain at 3.8%, marking its second unexpected rise in three months. This uptick augments worries about a longer-term cooling employment landscape in the US. However, the Fed's sustainable target is around 4%, so this miss to the upside is still well within a healthy range. April's Nonfarm Payrolls also came in significantly softer, adding only 175,000 jobs against an expected 243,000, marking its first miss of 2024 and the lowest in six months.

US dollar falls with cooling employment

The unexpected increase in jobless claims, against the backdrop of last week's employment data, prompted a decline in the US dollar against major currencies. This movement in the dollar is a critical signal for forex traders, indicating investor concern over a potential turnover in the US economy and potentially speeding up the forecasted changes to the Federal Reserve's monetary policy.

Treasury yields dampen as markets look to fall rate cuts

In reaction to the jobs data, the 10-year Treasury yield fell below 4.5%, signaling a market adjustment to the possibility of forthcoming Federal Reserve rate cuts, likely starting in September. This shift in yields directly impacts forex market strategy, as lower yields can decrease the attractiveness of dollar-denominated assets, possibly leading to a weaker dollar.

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