Dollar rises after labor data release
Thursday 2 March, 2023
Daily Currency UpdateThe dollar index strengthened to 105 after today's data release showed a tight labor market. This raises the likelihood that interest rates will remain higher for an extended period. The US Bureau of Labor Statistics reported a 3.2% increase in unit labor costs for the fourth quarter, surpassing the market expectation for a 1.6% increase. Further details of the report revealed a 4.9% increase in hourly compensation and a 1.7% increase in productivity. Initial jobless claims for the week ending on February 25th dropped from 192,000 the previous week to 190,000 claims. Today's print comes in slightly better than the 195,000 predicted by the market. Atlanta Federal Reserve President, Raphael Bostic, advised that rates should continue to rise past the 5% mark to ensure inflation does not become a problem again. Meanwhile, Minneapolis Federal Reserve President, Neel Kashkari, stated that the central bank's rate hikes are not having a significant effect on the services sector. Both Federal Reserve Governor, Christopher Waller, and Minneapolis Federal Reserve President, Neel Kashkari are scheduled to speak today.
Key MoversThe euro declined below 1.06180 against the USD today after data revealed that inflation in the eurozone was not as severe as investors had anticipated. Core Consumer Price Index (CPI) year-over-year data for the Eurozone came at 5.6%, up from the previous reading of 5.3%. Further data showed that the overall CPI had slowed slightly to 8.5% from 8.6 % previously. Both readings came in higher than market expectations of 5.3 % and 8.2% respectively. Eurozone unemployment remained steady at 6.7%. At this point, the European Central Bank's (ECB) rate hike of 50 basis points for March is widely anticipated and has been endorsed by several ECB policymakers. The pound traded below 1.19500 against the US dollar as comes under pressure following the Bank of England (BoE) Governor, Andrew Bailey's comments yesterday. He did not make any truly restrictive comments and stated "nothing is decided" in terms of the future of rate increases. Based on Bailey's comments investors have trimmed back their bets on higher rates and any further positive economic data will be used by the BoE to either reduce rate hikes or pause the cycle altogether. USD/CAD hit an intraday high near the 1.36300 mark but was unable to capitalize on any further positive moves as it retreated below the 1.36150 mark. Crude oil prices touch a nearly two-week high. Worries of rising borrowing costs leading to a dent in fuel demand and a dampening of economic growth are causing the market to lack bullish conviction. West Texas Intermediate crude oil trades above 78.000.
- EUR/USD: 1.059 - 1.0678 ▼
- GBP/USD: 1.193 - 1.2037 ▼
- AUD/USD: 0.6712 - 0.677 ▼
- USD/CAD: 1.3583 - 1.3644 ▼