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.

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

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD stays under bearish pressure and trades at its lowest level since early May below 1.0700. Unabated US Dollar demand amid risk aversion and looming EU political uncertainty exert downside pressure on the pair heading into the weekend.

EUR/USD News

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD extends its decline on Friday and trades at its lowest level in nearly a month below 1.2700. In the absence of high-tier data releases, the US Dollar continues to benefit from souring market mood, forcing the pair to stretch lower in the second half of the day.

GBP/USD News

Gold clings to recovery gains at around $2,330

Gold clings to recovery gains at around $2,330

Following Thursday's pullback, Gold holds its ground on Friday and trades in positive territory near $2,330. The benchmark 10-year US Treasury bond yield edges lower toward 4.2%, helping XAU/USD push higher ahead of the weekend.

Gold News

Monero price poised for a downward correction

Monero price poised for a downward correction

Monero price has encountered resistance at a critical level. The technical outlook suggests a potential short-term correction as momentum indicators signal a bearish divergence.

Read more

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

It will be another central-bank-heavy week with the RBA, SNB and BoE. Retail sales will be the highlight in the United States. Plenty of other data also on the way, including flash PMIs and UK CPI.

Read more

Majors

Cryptocurrencies

Signatures