US Dollar Faces Pressure Amid Rising Unemployment Claims and Powell's Rate Cut Comments

Thursday 05 December 2024 02:27pm

The US dollar experienced significant losses during Thursday's trading, driven by negative unemployment claims data and comments from Federal Reserve Chairman Jerome Powell, which bolstered market expectations for a rate cut.

Negative Unemployment Claims Data Weighs on the Dollar

The dollar took a notable hit with the release of US unemployment claims data, which surpassed market expectations for the first time in six weeks. The number of new claims rose to 224,000, higher than the expected 215,000 claims. This increase signals a decline in labor market performance compared to the previous week, contributing to pressure on the dollar and reinforcing market anticipations of continued US rate cuts.

Jerome Powell's Comments Add to Dollar's Weakness

Further exacerbating the pressure on the dollar were comments from Jerome Powell, who confirmed that the US economy is in an exceptional state, with the United States being a model of stability and resilience in the global economy. Powell expressed confidence in the current monetary policy stance, suggesting that the Federal Reserve is well-positioned to balance economic growth with inflation control. These remarks reinforced expectations that the Federal Reserve will continue to implement gradual interest rate cuts.

Rate Cut Expectations Intensify Pressure on the Dollar

The dollar also faced additional pressure due to heightened expectations of a rate cut by the Federal Reserve. Market projections indicate a 70.3% probability that the Fed will reduce rates by 25 basis points at its next meeting, with a 29.7% chance of keeping the rates unchanged. These expectations have weighed on the dollar's movements.

Dollar Index Responds to Developments

As a result of these factors, the US dollar index fell by 0.47%, settling at 105.84 points. Investors are now closely awaiting the upcoming US employment data, set to be released on Friday, as it could be pivotal in determining the dollar's trajectory in the coming period.