U.S. Economy, Oil Markets Still Feeling Effects of Hurricane Harvey

The U.S. Dollar was under heavy selling pressure from a basket of currencies on Thursday, led by a sharp rise in the Euro. The single currency zoomed past the psychological 1.2000 level and was on course to post its biggest daily percentage gain against the U.S. Dollar in nearly two weeks after the European Central Bank strongly hinted that a decision on tapering stimulus is likely in October.

September U.S. Dollar Index futures settled at 91.642, down 0.610 or -0.66%.

Lower demand for higher risk assets and lower Treasury yields also drove down the USD/JPY.

On Thursday, the ECB kept rates at record lows and confirmed that asset purchases would continue at least until December. ECB President Mario Draghi also cited the strength

Draghi reiterated, however, that policymakers would decide on tapering this autumn, adding:  Probably the bulk of these decisions will be taken in October.”

The dollar fell 0.71% against the safe-haven Japanese Yen after U.S. and German government yields declined on the back of the ECB decision to keep rates at record lows.

U.S. Economic Reports

The number of Americans filing for unemployment benefits jumped to its highest level in more than two years last week amid a surge in applications in hurricane-ravaged Texas, but the underlying trend remained consistent with a firming jobs market.

According to the U.S. Labor Department, initial claims for state unemployment benefits soared 62,000 to a seasonally adjusted 298,000 for the week-ended September 2, the highest level since April 2015.

In other news, Revised Nonfarm Productivity came out at 1.5%, higher than the 1.3% forecast. This is actually a negative because the report is an efficiency index. Revised Unit Labor Costs came in lower than expected at 0.2%. Traders were looking for a read of 0.3%.

IBD/TIPP Economic Optimism was 53.4, better than the 53.1 forecast and 52.2 previous read.

Gold

Gold rose to a one-year high on Thursday after the U.S. Dollar tumbled in response to weak U.S. jobs data and an unchanged growth and inflation outlook from the European Central Bank.

The weaker U.S. economic data pushed the odds for a rate hike sharply lower. The Fed cannot be comfortable with a weaker jobs market and the fact that the worst is still to come due to the possibility of rising unemployment in Texas because of Hurricane Harvey and in Florida with the onslaught of Hurricane Irma.

Gold was also supported by a surge in the Euro in response to the ECB outlook for lower growth and inflation. Safe-haven demand for gold also continued due to rising concerns over North Korea and the strong possibility of another nuclear weapons test on Friday.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil closed mixed on Thursday as traders responded differently to current events. U.S. oil continued to get a boost from U.S. refiners restarting after Tropical Storm Harvey, however, gains were limited by new disruptions caused by Hurricane Irma.

U.S. Texas Gulf Coast facilities were slowly recovering from the devastating effects of Harvey, which hammered Louisiana and Texas almost two weeks ago, shutting key infrastructure in the heart of the U.S. oil and natural gas industry.

In other news, the U.S. Energy Information Administration (EIA) said on Thursday that refinery utilization rates slumped 16.9 percentage points to 79.7 percent last week, the lowest rate since 2010.

Additionally, the EIA report said commercial U.S. inventories rose 4.6 million barrels the week-ending September 1, to 462.35 million barrels. However, U.S. oil production was also affected by the storm, with weekly output down from 9.5 million bpd to 8.8 million bpd.