Even Big Jobless Claims Improvement Fails to Help Dollar

There is very little demand for U.S. dollars this morning despite a sharp improvement in jobless claims. For week ended April 5th, jobless claims fell from 332k to 300k, the lowest level since May 2007. The 4-week moving average, which is less volatile also dropped 5k to 316k as continuing claims fell to its lowest level in 6 years. While lower claims do not always translate into stronger payrolls and all of this month's report is subject to Easter/Passover holiday volatility, the numbers are consistent with a slow and steady improvement in the labor market. Unfortunately that was not good enough to reverse the slide in the dollar. In fact not only did jobless claims dip but import prices also rose more than expected which should have been positive for the greenback yet with annualized price growth falling for the past 2 years, inflation is not a concern for the Federal Reserve at this time.

Having experienced steep losses since Friday's non-farm payrolls report, there are initial signs of exhaustion in the dollar. However the momentum is still heavily skewed to the downside and without supportive comments from U.S. policymakers or significant improvement in Tier 1 economic data, it may be difficult to get investors excited about buying dollars again especially as a large part of the USD/JPY unwind can be attributed to traders getting stopped out. When that happens, they will be gun shy about jumping back into the same position.

Although investors have largely shrugged off China's softer trade numbers - the surplus increased more than expected but exports fell sharply, commodity currencies overnight gains after Chinese Premier Li said the government is not considering near-term stimulus despite signs of downward pressure on growth. Considering that many investors and economists had been positioning for the Chinese government to accelerate support for the economy, today's comment should trigger profit taking in AUD and NZD.