The USD came under pressure yesterday after the weekly initial jobless claims numbers came in higher than expected, causing US treasuries to drop and surprise, easing Fed rate expectations... albeit marginally. GBPUSD and EURUSD gained to prior resistance levels as a result due to interest rate differentials.
Europe has technically fallen into a recession as a revision on economic growth for this quarter came in lower than expected at -0.1%. Falling inflation and weaker growth numbers aren't exactly the basis for the ECB to continue their rate hike cycle, but nonetheless money markets remain resolute in pricing two 0.25% hikes by the Bank over the next two months.
* Daily move - against G10 rates at 5:00pm, 08.06.23
** Indicative rates - interbank rates at 5:00pm, 08.06.23
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A very quiet day on the data front today with focus in the FX space largely falling on the Fed, ECB interest rate decisions next week, EU and US inflation numbers, and UK job numbers. USD took a knock yesterday following the jobless claims, with both GBPUSD and EURUSD now testing some key resistance levels in the market. A breach through here could see GBPUSD test the highs seen in May. GBPEUR continues to push higher, seemingly catching a second wind and set to target the highs seen earlier this month.
The USD seemed extremely sensitive to the initial jobless claims numbers yesterday. Weekly claims rose to the highest since November 2021, with lay off numbers - that have been rising over the past few months - now filtering through to the claims data. Rate expectations were scaled back as a result, and the USD index looks set to have its second week lower.
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