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US Dollar (DXY): Disappointing Economic Data Weighs Ahead of US Non-Farm Payroll Report.
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The US Dollar Index weakened due to sluggish economic data, causing traders to scale back bets on rates, reigniting recession concerns.
Highlights
- US dollar weakens ahead of non-farm payrolls report
- Initial jobless claims report indicates moderation in labor market
- Sluggish US economic data raises recession concerns, impacts rate bets
Overview
The US dollar weakened against some major currencies on Thursday as investors awaited the closely watched US non-farm payrolls report on Good Friday.
On Thursday, the June U.S. Dollar Index settled at 101.519, down 0.026 or -0.03%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) settled at $27.73, up $0.01 or +0.04%.
Disappointing Economic Data, Drop in Treasury Yields Weigh on U.S. Dollar
The report will follow disappointing manufacturing and services sector data from the Institute for Supply Management and private employment figures.
A drop in Treasury yields exerted pressure on the dollar index throughout the session, causing it to hit a two-month low this week.
US Initial Jobless Claims Report Indicates Moderation in Labor Market
Thursday’s US initial jobless claims report added to a slowing-economy narrative, with revisions to previous numbers after the government updated the model it uses to adjust the series for seasonal fluctuations.
Initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 228,000 for the week ended April 1.
The initial report was revised to show that the prior week had 48,000 more applications received than previously reported.
In addition, the number of people receiving benefits after an initial week of aid rose by 6,000 to 1.823 million during the week ending March 25, which is a proxy for hiring.
As a result, the revised data presents a different picture of the US labor market than expected at the start of the year, indicating a more moderate economy.
Sluggish US Economic Data Raises Recession Concerns and Impacts Rate Bets.
Due to the sluggish economic data, traders reduced their bets on how long US rates would remain in restrictive territory. Nonetheless, this also reignited concerns about the risk of recession.
Some analysts have noted that a US recession could potentially benefit the dollar since its impact would not be limited to the US only.
US Non-Farm Payrolls Report Expected to Trigger Volatile Response
Economists expected 239,000 growth in March non-farm payrolls per Reuters. The gain follows February’s 311,000. Non-farm payrolls have delivered more upside surprises than misses in recent years.
For markets that are open on Friday, this could lead to a highly volatile session. The US economic signs suggest the Federal Reserve may reverse its course on rate increases.
The US rate futures market indicates rates are likely to remain steady at the upcoming meeting. However, they are pricing in multiple rate cuts by year-end.
For a look at all of today’s economic events, check out our economic calendar.
About the Author
James Hyerczykauthor
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.
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