The USD has been retreating in the last two weeks, as the soft NFP and CPI data weighed, but it made a total reversal today after some strong economic figures from the US. The Manufacturing and Services PMI showed a nice improvement in activity during this month, while the unemployment claims fell back in the range after an increase in previous weeks.

US Jobless and Continuing Claims Overview

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• Initial Jobless Claims: The number of Americans filing for unemployment benefits for the first time came in at 215,000 for the week, lower than the anticipated 220,000. This is a decrease from the previous week’s revised figure of 223,000.
• 4-Week Moving Average (Initial Claims): The four-week moving average of initial claims rose to 219,750, up from 218,000 the previous week, indicating a slight uptick in initial claims over the past month.
• Continuing Claims: The continuing claims, which represent the number of people already receiving unemployment benefits, matched expectations at 1.794 million. This was a slight increase from the revised figure of 1.786 million from the previous week.
• 4-Week Moving Average (Continuing Claims): The four-week moving average of continuing claims increased to 1.782 million from 1.777 million the prior week, suggesting a marginally higher trend in ongoing unemployment benefits.

Continuing Claims Chart

Labor Market Resilience: The lower-than-expected initial jobless claims indicate a resilient labor market, with fewer layoffs than anticipated. This is a positive sign for the US economy, suggesting that employment remains strong despite broader economic uncertainties.

Continuing Claims Stability: The stability in continuing claims at 1.794 million aligns with market expectations, indicating that those who have lost jobs are not staying unemployed for extended periods. However, the slight increase in the four-week moving average of continuing claims suggests a small but noticeable trend of more prolonged unemployment.

Market Reaction: The jobless claims report can influence market sentiment, particularly regarding expectations for Federal Reserve policy. A resilient labor market can support the case for maintaining or even tightening monetary policy if inflation remains a concern. Conversely, if the labor market shows signs of significant weakening, it could prompt a more dovish stance from the Fed. This has pushed Treasury yields higher and reduced the likelihood of a Fed rate cut in the near term.

Risk Assets and USD Performance: Given the resilience in jobless claims, the USD might find support as the data underscores economic strength. However, the mixed signals with rising continuing claims and their moving averages could temper bullish sentiment. Risk assets like stocks might react cautiously, balancing the positive initial claims data with broader economic concerns, including inflation and interest rates. This contrasts with the ECB’s expected more aggressive rate-cutting stance, which is likely to keep the EUR under pressure. Consequently, the EUR/USD pair has seen a reversal from its earlier gains, reflecting the broader trend of USD strength and EUR weakness.

EUR/USD Live Chart