The traded higher against all major currencies on Thursday except. The Federal Reserve is meeting and a more rapid removal of political accommodations is widely expected. Today’s report confirms that the labor market is booming. The number of new jobless claims fell to 185,000 last week, its lowest level since 1969. Read it again – 1969. It’s a 52-year low. Weekly claims can be very volatile, but there has been a compelling downtrend that reflects the strain on the job market. Employers are reluctant to fire workers when there is a shortage of volunteer candidates, which can be a problem for wage growth.
The US inflation figures will be released tomorrow and economists expect the growth rate to slow and the annualized rate to accelerate. Given the recent comment by Federal Reserve Chairman Jerome Powell that it is time to remove the word ‘transient’ from the central bank’s description of inflation, prices will rise at their fastest pace in 30 years with a good chance of a rise in the monthly CPI. Gas prices were high throughout November, with many Americans reporting increased Thanksgiving dinner costs. Traders are cautiously buying US dollars and selling stocks ahead of Friday’s CPI release. If inflation is higher than expected, rate hike bets will rise, pushing the US dollar up against, and, while pushing stocks lower.
The three commodity currencies traded lower. The Canadian dollar continued its slide after the Bank of Canada said gasoline prices had recently fallen. The BoC expects to stay elevated next year and return to around 2% in the second half of the year. The higher dollar also pushed down, adding pressure on the loonie. A gentler Chinese made the dollar and the dollar come down. Tonight’s New Zealand will be the center of attention for the NZD.
The rise in the US dollar also fell below 1.1300. While a smaller one for Germany may have contributed to that move, the real worry is that eurozone countries will follow the UK in imposing further restrictions. The daily number of cases in the UK is at its highest level since January. It’s the same month that new cases hit a record 68,000. Cases in Germany hit record highs this month, and yesterday it reported the highest daily COVID deaths since February. Calls are increasing for restrictions before the Christmas holidays.
Tomorrow’s report is not expected to have a significant impact on the euro. The pound, on the other hand, could be affected by monthly GDP and industrial production figures, both of which are expected to be stronger. The Bank of England and investors will be eager to see if Omicron has affected its plans to remove stimulus.