News & Resources

Market Analysis

Latest Insights
Press Releases
Latest Insights

Market Wire
Falling Jobless Claims and Rising Producer Prices Keep Currency Markets on the Defensive

by Karl Schamotta | May 13, 2021

What happened: A better-than-expected 473,000 Americans submitted paperwork for state unemployment benefits last week – suggesting that businesses continue to scale up hiring efforts as the economy recovers. Economists had forecast a number closer to 490,000.

3.655 million people continued to collect payments in the week ending May 1.

Vaccinations, government handouts, and easing social distancing restrictions have helped lift consumer spending well above pre-pandemic levels, but the employment market remains deeply scarred. More than eight million jobs have been lost, and the number of people collecting benefits through one of several programs, including regular state aid and federal emergency programs, remains almost eight times higher than in 2019.

Inflation pressures continue to grow: A separate release showed production costs rising more quickly than expected. The Bureau of Labor Statistics reported that its producer price index for final demand jumped 0.6% from the prior month after a 1% gain in March, beating forecasts for a 0.3% increase. Excluding highly-volatile food and energy categories, core producer prices rose 0.7% – well above the expected 0.4%.

In the background: Markets are struggling to reconcile conflicting signals after last week’s disappointing unemployment report and yesterday’s superheated inflation numbers. Worker shortages, shifting consumer preferences, soaring commodity prices, and bottlenecks in the supply of critical components are all intersecting to inject uncertainty into the stream of data releases  – and although mainstream economists and Federal Reserve policymakers expect these effects to fade as conditions normalize, many market participants are taking out insurance anyway.

Caution prevails: US 10-year Treasury yields are holding steady near the 1.685% mark, and the trade-weighted dollar remains roughly 0.5% higher relative to levels from early yesterday morning. Technology sector shares are up, while emerging market and commodity-linked currencies are in negative territory as traders adopt defensive positioning.

Keep an eye out: Last night, Premier Li Keqiang – a trained economist and the second most powerful man in China’s Communist Party structure – reportedly told state broadcaster National Radio that policymakers would strengthen controls on the raw materials market to help limit costs for companies that have been pressured by a surge in commodity prices. If China successfully tamps down speculative activity, the global narrative might shift, and base metals prices could tumble – a development that would negatively impact the Canadian dollar.
​​​​​​
Karl Schamotta
Chief Market Strategist
@vsualst

“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.

Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.

Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.

This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.

Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.

Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.

FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.

This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.

Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.

The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.

© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.