US Dollar Surges versus EUR, GBP, JPY after Strong February Data
THE TAKEAWAY: USD Producer Price Index (FEB) +0.7% as expected, from +0.2% (m/m), +1.7% versus +1.8% expected, from +1.4% (y/y) > USD Initial Jobless Claims (MAR 9) > 332K versus 350K expected, from 342K (revised from 340K) > USDOLLAR NEUTRAL
Another US data release, another indication that the US economy is continuing to firm, ever so slightly. Inflation at the factory gate remains a few ticks below the Federal Reserve’s medium-term inflation target of +2.0% y/y, with the February Producer Price Index showing inflation at +1.7% y/y on both the headline and core readings. While this data hasn’t inspired much of a move in the US Dollar, it does suggest that inflation could be rising in the Consumer Price Index as well, as companies pass on rising costs to consumers. Generally speaking, higher inflation tends to lead to higher rates of inflation.
But the more important data released this morning was the Initial Jobless Claims print for the week ending March 9. Claims beat expectations, at 332K versus 350K expected, according to a Bloomberg News forecast (this data is a measure of jobless claims filed by those seeking state jobless benefits; the lower the number, the more bullish the implication for the US labor market). It’s clear that the trend of diminishing claims is bullish for the US economy, as well as the S&P 500. As the chart above shows, claims have been an anchor for US equity markets, providing a sound economic reason for sentiment to rebound after various lulls.
Charts Created using Marketscope – Prepared by Christopher Vecchio
Following the release, the USDOLLAR rallied from 10549 to as high as 10558, before for falling back to 10547, at the time this report was written. Of note, the USDJPY rallied from 96.41 to as high as 96.58, before falling back to 96.47; and the EURUSD fell from 1.2925 to a new yearly low at 1.2910, before rallying back to 1.2937.
--- Written by Christopher Vecchio, Currency Analyst
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