U.S Dollar Rebounds on Remarkably Low Jobless Claims

The U.S dollar is slightly higher during the US session, bolstered by an unexpectedly positive unemployment claims report. Risk-on rallies in the stock markets, which are also losing steam, help strengthen the Yen slightly. So far this week, the biggest performer has been the Australian dollar, followed by other commodity currencies. The worst currencies are the Swiss Franc and the Japanese Yen. Before the weekly close tomorrow, there’s still time for the market to modify the technical outlook.

The number of initial applications for jobless claims in the United States for the week ended December 4 fell by -43 thousand to 184 thousand, which is much better than expectations of 225 thousand people. It is also the lowest level since September 6, 1969. The four-week moving average of initial claims fell from 21k to 219k, the lowest since March 7, 2020.

In the week ended November 27, the number of standing claims rose by 38,000 to 1,992,000. The four-week moving average number of ongoing claims fell -54,000 to 2,028,000, the lowest since March 14, 2020.
Following the stronger-than-expected statistics, the Dollar Index (DXY) witnessed some positive ticks, climbing from 96.06 to above 96.10.

Following last Friday’s mainly positive employment report and Wednesday’s considerably higher-than-expected job vacancies figure, the data adds to the narrative that the US labor market is very strong/tight at the present.

High U.S Interest Rates Will Raise European Bond Yields

The U.S Federal Reserve will begin raising interest rates in June, with three 25-basis-point hikes planned for the year. The ECB’s monetary stance will continue accommodating, with purchases under the APP continuing and policy rates remaining unchanged. There will be a considerable policy divergence with the Fed as a result of this. Rising US bond yields will put upward pressure on European bond yields, causing the euro to depreciate.

Uncertainty has returned to cloud the future following a rapid post-lockdown rebound in 2021. Economists summarize their primary assumptions and judgment calls regarding macroeconomic and financial market developments in 2022.

The epidemic will be a headwind in the first half of the year, but the eurozone and US economies will not experience more outright reductions. This implies that the Omicron variant causes no more severe disease than previous variants and that immunization and prior infection provide some immune protection.