Jobless claims push dollar further down

Important Calendar Events

• JPY: Yearly Producer Price Index
• EUR: French CPI, EU Trade Balance, ECB President Christine Lagarde speech
• USD: Monthly Retail and Core Retail Sales, Monthly Industrial Production, Preliminary UoM Consumer Sentiment
• GBP: Monthly GDP, CB Leading Index, Monthly Industrial Production and Manufacturing Production, Goods Trade Balance

USD

The dollar slipped on Wednesday after US inflation rates rose but still came in line with expectations. The USD fell even further on Thursday, after the announcement of jobless claims in the US.  The number of people filing unemployment claims increased to an eight-week high, as a surge in Omicron cases in the US led to layoffs.

The dollar index slumped to 94.66 on Thursday, a decline of over 0.2%, and is currently near 94.8. The USD has been bearish since Tuesday, with the dollar index recording its lower values since November.

Inflation seems to be one of the biggest challenges the Federal Reserve will have to face, with the CPI index hitting a 39-year high on Wednesday. On Thursday, Federal Reserve Governor Lael Brainard, in a hearing for her nomination to become the U.S. central bank's vice chair, focused on the need to bring inflation under control.

Important US indicators that are scheduled to be released today include: Monthly Retail and Core Retail Sales, Monthly Industrial Production, and Preliminary University of Michigan Consumer Sentiment.  The Retail Sales data in particular are important economic indicators and can help investors gauge the state of the US economy and provide hints towards the Fed’s future monetary policy. 

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EUR 

The Euro benefitted from the dollar’s slump and was up by almost 0.2% on Thursday, with EUR/USD breaking clear from its 1.138 resistance on Thursday morning and climbing to 1.146, trading sideways around this level for most of the day. The current outlook for the currency pair is slightly bullish, with potential resistance at 1.226, while if the rate declines again, support may be found at 1.272.

Inflation is still a big issue in the Eurozone, with ECB Vice President Luis de Guindos warning that the current spike in inflation was not going to be as transitory as originally expected, although the EU central bank is not expected to change its monetary policy soon to combat rising inflation rates.

EU economic and inflation indicators that are scheduled to be released today include French Consumer Price Index and the EU Trade Balance. ECB President Christine Lagarde is also scheduled to speak at the Conference of Parliamentary Committees for Union Affairs. Her speech may cause some volatility in the currency, as traders will try to assess her stance on combating inflation and future interest rates.

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GBP 

The pound rose again on Wednesday, even as UK Prime Minister Boris Johnson was called to resign after admitting to attending a “bring your own bottle” party during a coronavirus lockdown on May 2020. The sterling is considered a risk-sensitive currency and has been rising against the dollar for the past few days, supported by expectations that the Bank of England will raise interest rates further.

GBP/USD climbed almost to 1.375 on Thursday, as the pound gained strength against the dollar. The currency pair keeps moving on an uptrend. If the uptrend continues, there may be resistance at the 1.42 level, and if the GBP/USD price falls, it may find support at 1.34.

A number of UK indicators are scheduled to be released today, such as: Monthly GDP, CB Leading Index, Monthly Industrial Production and Manufacturing Production, Goods Trade Balance. These are indicators of inflation and of the overall economy in the UK and might affect GBP price. 

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JPY 

USD/JPY has been falling heavily for the past couple of days and has hit a 3-week low on Thursday. More risk-sensitive assets have been benefitting the past few days, which may help limit the ascend of the safe-haven Yen, even as the dollar slumps. 

The currency pair has broken through its 114.95 support, falling below the 114 level and the outlook for USD/JPY is bearish. If the currency rate continues its downfall, it may find further support at the 113.87, and further down at 112.55. If the pair starts recovering, resistance may be found at 115.5, while the 116 level may present another resistance point.

The yearly Producer Price Index for Japan is going to be released early on Friday, which is an indicator of inflation and may cause some volatility on the currency. USD/JPY traders should focus on the US economic indicators scheduled to be released today, as these have the potential to cause high volatility in the USD. 

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Written by:
Myrsini Giannouli

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