Yesterday the USD was showing signs of weakness and today, the US dollar is experiencing a decline due to a drop in US Treasury yields and a weak initial jobless claims report. There have been predictions of a potential slide in the Euro this week, and we were holding a similar opinion after the failure to move above moving averages last week, which often indicates that excessive bearish sentiment had been factored into the market.

Lower yields generally make the currency less attractive to investors, leading to a decline in its value. Additionally, a disappointing initial jobless claims report suggests ongoing challenges in the labor market, which is weighing on the overall strength of the US dollar.

Weekly US Initial Jobless Claims and Continuing Claims

• Initial jobless claims for the current week 261K vs 235K estimate
• Prior week 232K was revised to 233K
• For the week ending June 3, the seasonally adjusted initial claims stood at 261,000, an increase of 28,000 from the previous week’s revised level of 233,000. This is the highest level of initial claims since October 30, 2021, when it was 264,000.
• The 4-week moving average for initial claims was 237,250, an increase of 7,500 from the previous week’s revised average of 229,750.
• The seasonally adjusted rate of continuing claims was 1.2 percent for the week ending May 27, remaining unchanged from the previous week.
• The number of seasonally adjusted continuing claims for the week ending May 27 was 1,757,000, a decrease of 37,000 from the previous week’s revised level of 1,794,000.
• The 4-week moving average for continuing claims was 1,784,750, a decrease of 12,500 from the previous week’s revised average of 1,797,250.
• The largest increases in initial claims for the week ending May 27 were in Ohio (+2,159), Texas (+1,229), New York (+1,177), Illinois (+1,117), and Missouri (+962).
• The largest decreases in initial claims for the same period were in California (-771), Arkansas (-455), Iowa (-419), North Carolina (-388), and Michigan (-365).

A big surprise in the initial claims but continuing claims did fall. Nevertheless this is the highest level for initial jobless claims since October 2021. Of note as well is that continuing claims is on a week lag. Is this the start of the jobs market starting to feel the impact of FED rate hikes?

Yields have moved lower with the 2-year now down 4.4 basis points at 4.508%. The 10-year is down 0.4 basis points to 3.779%. The expectation for a June rate hike is now at 25% which is lower than earlier levels today of about 31%.