The US dollar weakened for the second consecutive session on Thursday as improving jobs data and another rally in the broader financial markets reduced the currency’s safe-haven appeal. The greenback has come under pressure this week restarting its surprising 2021 rally. With inflation fears widespread and the economy ostensibly recovering, is it high noon for the dollar?

According to the Bureau of Labor Statistics (BLS), the number of Americans filing for unemployment benefits clocked in at 712,000 in the week ending March 6, coming in below the market forecast of 725,000. This is down from the 754,000 Initial Jobless Claims in the previous week, and it is the lowest reading since the first week of November.

Continuing Jobless Claims fell to 4.144 million, while the four-week average, which eliminates week-to-week volatility, dropped to 759,000.

There were an additional 478,000 applications submitted through a temporary federal-relief program. The combined federal and state benefits remained above one million, and they have not fallen below this level in nearly a year.

President Joe Biden will sign a $1.9 trillion stimulus bill that includes $1,400 stimulus checks for most Americans on Friday.

The improving labor market is being attributed to more businesses reopening as a growing number of states and cities lift their coronavirus-related restrictions.

Inflation was the other crucial data measurement this week, with the annual consumer price index (CPI) climbing to a 12-month high of 1.7%, driven by higher energy, food, shelter, and utility costs. Last week, Federal Reserve Chair Jerome Powell warned that inflation could surge as the US economy reopens, although he dismissed it as something only temporary.

On Friday, the producer price index (PPI) will be released for February. Economists are anticipating a substantial annualized boost of 2.7%.

The other development that traders monitored on Wednesday was the bond market, something that has wreaked havoc in financial markets this month. The Treasury held a 10-year bond auction, and demand was tepid, causing the instrument to trade at 1.523%. This sparked another rally in the leading benchmark indexes.

On Thursday, Treasurys were mostly in the red, with the benchmark 10-year bond dipping 0.019% to 1.501%. The one-year note shed 0.005% to 0.081%, while the 30-year bond edged up 0.007% to 2.249%.

US bonds eased after the European Central Bank (ECB) indicated that it would accelerate its bond-buying program. The size of its quantitative easing would remain unchanged at $2.2 trillion, but asset acquisitions conducted under its pandemic emergency purchase program (PEPP) would “be conducted at a significantly higher pace” over the next three months.

The US Dollar Index, which tracks the greenback against a basket of currencies, extended its weakness to two sessions. The DXY declined 0.24% to 91.61, from an opening of 91.79, paring its year-to-date gain to below 2%. Following a significant slide in February, the index has recovered in March, thanks to a 1.3% surge this month.

The USD/CAD currency pair tumbled 0.29% to 1.2584, from an opening of 1.2619, at 12:34 GMT on Thursday. The EUR/USD advanced 0.2% to 1.1953, from an opening of 1.1931.

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Post tags: Bonds, CPI, Dollar, DXY, EUR/USD, European Central Bank, Jobless Claims, United States, US Dollar Index, USD/CAD

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