The US dollar is trading weak after experiencing the sharpest decline in 10 days on the back of a disappointing jobless claims report that released in the previous session and heightened worries about a possible delay in economic recovery. At the time of writing, the US dollar index DXY is trading around 90.35.

Traders failed to look upon the US dollar as a safe haven currency, causing it to slide along with equity markets after the initial jobless claims figure soared to 861k for the previous week, against expectations of a reading of 773k instead. In addition, the figure for the week before that was also revised higher, from 793k to 848k, highlighting the fragile state of the US labor market.

Rising unemployment will weigh on the US economy even as it looks to recover from the pandemic-inflicted damage with the help of monetary and fiscal stimulus. Despite recent positive economic data releases, the weak performance of the labor market is exerting downward pressure on the US dollar for now, even as it increases the pressure on the Biden administration to roll out the $1.9 trillion stimulus package soon.

After climbing higher for two consecutive sessions, the dollar index fell by 0.4% in overnight trading. So far this week, the greenback is set to remain steady, posting almost no gains or losses since the previous week.