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US Data Send Greenback Mixed Signals Ahead of Holidays

Matt Eidinger November 25, 2020

A wave of mixed economic data – including a disappointing showing in high-frequency jobless claims data – left the US dollar untouched this morning ahead of the American Thanksgiving holiday on Thursday.

According to the US Department of Labor, weekly jobless claims continued to rise last week – climbing 30,000 to 778,000 – sending warning signals that the labor market has indeed taken a U-turn as a result of rising coronavirus infections in the United States.

Continuing claims continued to fall – dropping nearly 300,000 to just a hair above the 6 million mark. While this may seem like a victory at first glance, pandemic-related assistance programs rose nearly 600,000 to 20.5 million, more than offsetting the declines in regular state claims and pushing the number of Americans receiving government assistance higher for the first time since September.

Moving on to the Bureau of Economic Analysis, the second reading on US GDP growth in the second quarter was unchanged from the advance estimate – reconfirming an annualized expansion rate of 33.1% as the US economy went back into full gear through the summer months.

Changes underpinning the second estimate included modest upwards revisions to gross private domestic investment (+84.9%) as well as a larger-than-expected decline in government spending (-4.9%) as assistance programs began to fade.

Next, the US Census Bureau reported an expansion of the US trade deficit last month to $80.29 billion – more than 20% greater than one year ago. Greater export activity was apparent due to increased capital goods and consumer goods exports. However, these gains were surpassed by greater imports of industrial goods and other types of capital goods.

The Census Bureau also reported October durable goods spending advanced 1.3% – notably lower than the revised 2.1% reported for September, and still well below pre-COVID levels of about $250 billion reported in February. Excluding the volatile transportation component, the October figures advanced 2%.

Although today’s GDP figures reaffirm a stronger comeback for the US economy than was expected when the coronavirus pandemic began, this data is a lagging indicator and does not appropriately capture current conditions – or what the coming months might look like – as accurately as the jobless claims do as the  resurgent coronavirus prompts a return to targeted lockdown measures in locations with high infection rates around the United States.

However, recent developments from key COVID-19 vaccine developers have propelled US equities to record levels in recent days and kept downward pressure on the US dollar, on a trade-weighted basis.

Financial markets were further buttressed by news of Janet Yellen’s appointment as Treasury secretary in the imminent Joe Biden administration. When the new administration takes office in 2021 it will face the daunting task of leading the economy through what is anticipated to be the home stretch of the pandemic. While consumer spending is expected to be strong through the fourth quarter, the end of year expiration of key support programs offered by both the Federal Reserve and the Treasury Department could expand the cracks starting to form in the labor market recovery. 

Matthew Eidinger
Market Strategist & Fintech Specialist