The U.S. dollar continues to climb against the Euro in today’s trading session and set a more than one-week high against a basket of its major peers as traders sought safety after a series of economic data prompted a reassessment of their outlook for global monetary policy.
The number of Americans filing new claims for unemployment benefits jumped to a 1-1/2-year high last week, pointing to a weakening labour market as demand slows, potentially giving the Federal Reserve room to halt further interest rate increases next month.
U.S. producer prices, on the other hand, showed a moderate rise last month, posting the smallest annual increase in producer inflation in more than two years, further evidence that inflation pressures were easing.
The producer price index for final demand rose 0.2% last month. In the 12 months through April, the PPI increased 2.3%. That was the smallest year-on-year rise since January 2021 and followed a 2.7% advance in March.
"I think the market is starting to rethink the outlook for the Fed cutting rates after inflation, while lower, remained on the high side. The dollar stands to gain if markets pull rate cuts off the table, a scenario that would allow it to retain its yield advantage for longer," said Joe Manimbo, senior market analyst, at Convera in Washington.
“After the ECB and the Bank of England, you start to get the sense that any further rate hikes from Europe might be more modest in scope than previously thought. If some people are questioning the Fed cutting rates, and at the same time the market sees less upside for interest rates abroad, that helps to level the playing field when it comes to foreign exchange." He added.
As we head to the end of today’s trading session, we witnessed the release of the Michigan consumer sediment index which hit the market at 57.7 which is well below analysts’ expectations who were expecting a figure of 63.
The negative news however has failed to boost the Euro against the dollar as market participants become fearful of exiting the greenback as we head into the weekend.