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Jobless Claims Fan Flames of Dollar’s New Drop

Stephen Casey January 11, 2018

The US dollar had managed to claw back most of Wednesday’s losses before a few key releases forced an about face Thursday morning. Just a few minutes ago, it was reported that initial jobless claims increased to 261k for the week ending January 5. This is the fourth consecutive weekly jump and the highest reading since the week ending September 23, 2017.

Adding insult to injury was a decline in producer prices in December, which fell by 0.1%. This drop represented the worst result since August 2017, while the details showed similar failures in trade, transportation and warehousing. The data calendar has been quiet this week, so dollar bears have welcomed this morning’s news as a reason to engage short positions.

Prior to the jobless data, the greenback had done a good job of erasing most of Wednesday’s losses, sparked by the infamous China-treasury report. Chinese officials did attempt to walk back those comments today – to some extent. The euro took the brunt of the dollar’s strength – until the ECB minutes hit the tape.

The ECB minutes revealed that Europe’s central bank may consider a shift in policy. Policy makers also confirmed some comfort in improving wages, while acknowledging inflation remains a concern. Today’s release is notable as at the December meeting, the ECB decided to extend its asset purchase program until at least September of this year – despite the best economic growth in 10 years.

The Canadian dollar remains offered, still being sold from yesterday’s anonymous comments from a Canadian official that Trump may pull US out of the NAFTA agreement.

Bottom Line: The hits keep on coming for the dollar, as evidenced by today’s jobless claims and PPI misses. Although holiday hiring is generally volatile, the market is currently looking for any reason to ditch the dollar, and a three-month high on an important figure is as good a reason as any other. There was some positivity in the details, as the unemployment rate for those eligible for benefits dropped from 1.4% to 1.3%. December CPI figures close out a busy week on Friday.

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