US Jobless Claims Analysis: Three million is only the beginning, three reasons why the dollar may rise

The US reported a leap to 3.283 million jobless claims in the wake of the coronavirus crisis.
The figures may continue rising as lockdowns spread.
There are three reasons why it is positive for the dollar.

Yohay Elam FXStreet

Unemployment is engulfing the US – weekly jobless claims jumped to 3.283 million, an increase of 1,053%. The four-week moving average is near one million, also surpassing the worst since the Great Financial Crisis.

And it may get worse. Additional states and cities are announcing lockdowns or other social distancing restrictions. Moreover, several states have been having a hard time processing all the claims. An increase to four or five million cannot be ruled out.

The initial market reaction has been muted, as traders were bracing for a horrible outcome. However, this may have a positive impact on the US dollar, due to its safe-haven status.

1) The Fed is done for now: Contrary to what Jerome Powell, Chairman of the Federal Reserve said, the central bank has little ammunition left. Just on Monday, the Fed announced open-ended QE. How can the Fed outdo itself after announcing unlimited action?

2) Government stimulus may be insufficient: The Senate had a hard time approving a massive $2 trillion package – yet to be approved by the House – and it may already be insufficient. It seems that despite all the bipartisan efforts, politicians are not up to speed with reality. Failure to speed up efforts – especially support for workers – nay further exacerbate the situation. The best thing Washington could do would be to put all those unable to work on vacation – stopping the bleeding of unemployment.

3) More impatience from the president: Donald Trump is surely watching the data and worrying. He already expressed his desire to see lockdowns end by Easter – in less than three weeks. He does not want the "cure to be worse than the disease." Such figures may trigger further impatience, in turn hindering efforts to fight the disease.

Overall, coronavirus is taking a heavy toll on the US labor market, which offers few protections. Things may get worse before they get better, and the dollar – due to its safe-haven status – has room to rise.

More: Coronavirus: How Trump's shortcuts could lengthen and exacerbate stocks' suffering

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD flatlines near 0.6965 as less hawkish RBA counters USD weakness

AUD/USD holds steady above a two-week low, trading near 0.6965 in the Asian session on Wednesday as early midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, reviving safe-haven demand triggers a fresh leg down in US bond yields, offsetting Fed hike bets and exerting additional pressure on the buck. However, a less hawkish RBA caps the Aussie.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold surges past $4,000 as USD falls in reaction to US midterm election results

Gold catches aggressive bids on Wednesday, surging past the $4,000 psychological mark heading into the European session as the US midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, softer US bond yields counter Fed hike bets and contribute to driving flows to the non-yielding bullion.

Bitcoin tests critical support, Ethereum struggles below resistance, XRP extends losses

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) remain under pressure on Wednesday as bearish momentum continues to weigh on prices. BTC approaches key support around $76,466, and a decisive close below could open the door to deeper losses. Meanwhile, ETH struggles below key resistance while XRP faces rejection at the upper trendline of a falling channel pattern, all hinting at deeper losses.

US Dollar Index dives to late September lows near 101.25 on US election results

The US Dollar Index, which tracks the Greenback against a basket of currencies, comes under intense selling pressure during the Asian session on Wednesday, dropping to its lowest level since late September as early US midterm election results heightened political uncertainty.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.