Forex - Dollar Advances as Jobless Claims Data Stokes Nonfarm Payroll Optimism

5 April 2019, 09: 05
© Reuters.

The U.S. dollar was higher against its rivals Thursday as U.S. jobless claims fell to a multi-decade low, stoking optimism about the labor market ahead of the crucial nonfarm payrolls data due Friday.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.25% to 96.90.

The U.S. Department of Labor reported Thursday that initial jobless claims dropped by 10,000 to a seasonally adjusted 202,000 for the week ended March 31, beating economists’ forecast for a drop of 4,000.

"The data adds to the evidence that the trend in employment growth has not slowed significantly. We continue to forecast a strong rebound in payrolls growth in tomorrow's report for March," HFE said in a note.

The dollar was also boosted by somewhat hawkish mixed remarks on monetary policy from Fed speakers.

Federal Reserve Bank of Philadelphia President Patrick Harker said he sees "at most" one rate hike in 2019 and one in 2020. Federal Reserve Bank of Cleveland President Loretta Mester, meanwhile, hinted at the possibility of higher rates should the economy pick up momentum.

Sterling, meanwhile, lost ground against the dollar as traders prepare for a the possibility of a prolonged Brexit extension after the U.K lawmakers narrowly approved a bill, forcing the Prime Minister Theresa May to seek a further extension of Article 50 to prevent a no-deal Brexit on April 12.

The bill does not, however, compel the EU to grant an extension, so a no-deal Brexit, while increasingly unlikely, remains on the table.

GBP/USD fell 0.68% to $1.3069, with market participants opting to sit out of cable until a clearer path for Brexit was established.

UBS said it does not advocate taking directional views in sterling and expects the pound to "remain susceptible to volatility at each stage of what is becoming an increasingly protracted Brexit process."

EUR/USD fell 0.13% to $1.1219 as German manufacturing orders slumped, renewing fears a recession is brewing in the euro area economy. Both Germany and Italy downgraded their GDP forecasts.

USD/JPY rose 0.07% to Y111.55 as risk sentiment remained supported as traders bet the U.S. and China will reach a consensus on a trade deal.

USD/CAD rose 0.06% to C$1.33448 after hitting a session high of $1.3373 as oil prices moved off lows.