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US Jobless Claims Data Bolster Case for Fed Rate Hike

Stephen Casey March 9, 2017

US jobless claims remain historically low as 243K Americans filed for first time unemployment benefits for the week ending March 4th. Although today’s result presents a 20K increase over last week’s 44-year low, this morning’s claims data support the argument for a Federal Reserve interest rate hike this month.

Today’s 243K headline number brings the streak to 105 straight weeks for unemployment claims below 300k, the level at which Wall Street economists consider consistent with a healthy labor market.

The U.S. dollar is trading marginally higher this morning as traders position themselves amid a number of key data releases. As we go to print this morning, traders are digesting not only the US jobless claims figures but also the European Central Bank’s latest policy decision.

European policymakers kept their headline interest rate at 0.0% but Chairman Mario Draghi has begun his statement and press conference, which accompanies each meeting. Leading up to today’s policy announcement, the euro had lost a few points versus the greenback as the interest rate outlook favors the big dollar.

The number of people who continue to receive unemployment benefits in the U.S. fell by 6K to 2.06 million while the unemployment rate for those eligible for benefits held firm at 1.5%.

Tomorrow morning, the markets get an even better indication of the American labor sector when February’s non-farm payrolls will be released. It’s expected that the US economy created 108K jobs last month. On Wednesday, ADP announced private employers hired 298K individual last month, better than the 180K which had been expected.

Bottom Line: Despite this morning’s jump in initial claims, American unemployment remains at historically low levels, underscoring the need for a Federal Reserve interest rate hike at next week’s meeting.  The U.S. dollar should continue to be supported against every major currency, as policy guidance influences price action.

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