Dollar Softens Even Jobless Claims Improve
AUGUST 13, 2020
The U.S. dollar is under pressure again this morning, with the Dollar Index trading 0.3% lower.
And the greenback is not finding any relief even after bright signs for the labor market. Weekly jobless claims fell to 963K, beating estimates of 1.1M. This is the first weekly reading below 1M since the pandemic began in March. Continuing claims also decreased to 15.5 million, the lowest since April.
While the data shows some improvement, they remain historically awful. Some analysts also suggested that a recent drop in claims could also potentially reflect the smaller incentive to file after the extra $600 a week expired at the end of July.
Meanwhile, in Washington, hopes of a virus stimulus package are dimming as both sides remain far apart, and President Trump said a deal is “not going to happen.” The Senate is set to go on recess until the end of the month, making a deal less likely.
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The Euro took advantage of the weakening greenback and gained half a percent. The common currency is now less than 1% away from fresh 2-year highs versus its American counterpart.
The Euro also got a modest boost after the United States did not follow through on a threat to up tariffs on 7.5 billion dollars’ worth of European goods. There was a “modest” change to the list of products subject to tariffs, but the overall amount was unchanged. The continuing tension is a result of what the U.S. feels ae illegal Airbus SE subsidies that put American airline manufacturers at an unfair disadvantage.
The Canadian dollar also benefited from a falling U.S. dollar. CAD is 1.4% stronger so far in the month of August, making it the second strongest currency after the Norwegian krone.
However, much like the other commodity-based currencies, the loonie’s gains were limited as the price of crude oil traded between flat and modest losses. The International Energy Agency cut its estimates for oil demand worldwide through the end of next year. The agency fingered a worsening outlook for air travel as the global pandemic continues to be a thorn in the side of the world’s economy.