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Dollar Reaction to Inflation Figures and Unemployment Claims

Dollar Reaction Inflation Unemployment Claims
A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration/Files

Dollar reaction to mixed U.S. inflation data and higher unemployment claims; anticipation surrounds RBNZ Governor’s speech.

The latest data on U.S. inflation and unemployment claims has influenced the dollar index (DXY) movement, with mixed results seen during the Asia session. The Personal Consumption Expenditures (PCE) Price Index for January showed a notable increase, with headline and core figures rising. The headline PCE rose by 0.3% month-on-month (MoM), the highest growth in four months, while the core PCE jumped by 0.4% MoM, marking the biggest gain since February 2023. On an annualized rate, headline and core PCE remained unchanged at 2.4% and 2.8%, respectively.

However, the dollar initially faced pressure as unemployment claims for the previous week came in higher than forecasted, signaling a softer labor market. The number of claims reached 215,000, surpassing the forecast of 209,000 and last week’s reading of 202,000.

In response to the data release, the dollar index (DXY) dropped as low as 103.65 before rebounding strongly to hit 104.18, reflecting the market’s reaction to the mixed economic indicators.

Dollar Reaction to Inflation Figures and Unemployment Claims

The Asia session also saw anticipation surrounding the speech by Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr. Investors awaited further insights into the monetary policy statement released on February 28, which kept the official cash rate on hold at 5.5% for the fifth consecutive meeting. The New Zealand dollar (NZD) experienced fluctuations ahead of Governor Orr’s speech, dropping to a low of 0.6070.

Looking ahead, key events for the U.S. dollar include the release of the ISM Manufacturing Purchasing Managers’ Index (PMI) and a speech by Federal Reserve Governor Christopher Waller. The ISM report is expected to shed light on the manufacturing sector’s performance, focusing on the Prices index, which could signal inflationary concerns. Governor Waller’s speech, scheduled at the U.S. Monetary Policy Forum in New York, may provide insights into the Fed’s stance on interest rates amid recent inflationary pressures.

Regarding central bank notes, the Federal Reserve has maintained its target range for the federal funds rate at 5.25% to 5.50% for the fourth consecutive meeting. The Committee remains vigilant regarding inflation and economic activity, stating that adjustments to the target range will depend on incoming data and the evolving outlook.

As trading continues, market sentiment appears cautiously optimistic, with the dollar’s movement influenced by economic data releases and central bank communications.

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