The dollar is putting up a fight against the other major currencies this morning with help from improving trade sentiment, relatively good jobless claims, and poor data from the United Kingdom.
U.S. jobs data allows EUR/USD to stabilize
Despite U.S. unemployment being at its lowest levels since 2000, weekly jobless claims data missed expectations, allowing the EUR/USD pair stabilize around 1.238.
The pair fell as low as 1.236 earlier Thursday on the dollar’s strength from better sentiment around trade and rising U.S. Treasury yields.
The initial jobless claims hit a three-week low, coming out at 232,000 for the week ending April 13. This is slightly lower than 233,000 the previous week, but higher than the 230,000 claims expected. Unemployment, or continuing jobless claims, dropped to 1.863 million for the week ending April 6 from 1.878 million the previous week.
The numbers indicate a tightening labor market and employers holding onto their staff due to a shortage of qualified workers. A claims number below 300,000 is considered an indication of a healthy labor market.
U.K. retail misses the mark
The GBP/USD pair is trading up around 1.424 after dipping as low as 1.416 on retail sales data for March.
Due to the snow and cold weather during March, retail was expected to fall, but the results came in down 1.2% month over month, compared to the 0.5% drop expected. Year over year, sales grew 1.1% when they were expected to hit 2.0% growth. Retail sales excluding fuel also missed estimates.
The pound has suffered from worse-than expected data this week. GBP/USD hit multi-year high of 1.437 Tuesday morning before dropping on poor wage data. Then, inflation came out lower than expected Wednesday, instantly pushing the pair nearly 100 pips lower to 1.418.
Despite the poor data, the Bank of England is still expected to raise interest rates on May 10. Our chief economist Jeremy Cook believes this is a mistake considering the relative weakness of the U.K. economy.
There is also renewed uncertainty around what Brexit will look like as the House of Lords defeated the withdrawal bill as it stands, proposing amendments to keep the U.K. in the Customs Union. The amendments will now go to the Commons for a vote. A date for the vote has yet to be set.
Japan, U.S. agree to more trade talks
President Trump and Japanese Prime Minister Shinzo Abe announced during a joint press conference at Mar-a-Lago Wednesday that they would have more discussions around trade, but didn’t say when and showed conflicting viewpoints on the type of trade solution they would like to see.
Trump said the U.S. would like “free, fair and reciprocal” trade through a bilateral trade agreement. Abe said the Trans-Pacific Partnership was best for both countries. President Trump has gone back and forth in recent weeks about rejoining the TPP, which he withdrew the U.S. from during the first few days of his presidency.
The announcement of more talks helped the risk atmosphere, and USD/JPY reached a high of 107.5 overnight. The dollar gained on the yen yesterday when news of CIA chief Mike Pompeo’s trip to North Korea last week broke. The pair is trading lower around 107.3 before the U.S. market opened Thursday