DXY Index Can’t Hold Gains After Jump in Unemployment Claims

The USD index has been bullish since Friday, but it failed to hold the PPI gains today after a jump in US unemployment claims, which indicates a possible retreat in the coming days.

Initial jobless claims have seen a significant rise, increasing by 27,000 over the past two weeks compared to just 215,000 during the week of November 23. This marks a notable shift in labor market dynamics. Fed Governor Waller highlighted this report as one of five critical data points influencing his decision at the December FOMC meeting.

US November PPI Inflation Report

• PPI y/y: +3.0% (vs +2.6% expected; prior +2.4%, revised to +2.6%).
• PPI m/m: +0.4% (vs +0.2% expected).
• PPI ex-food and energy y/y: +3.4% (vs +3.2% expected; prior +3.1%, revised to +3.4%).
• PPI ex-food and energy m/m: +0.2% (vs +0.2% expected; prior +0.3%).
• PPI ex-food, energy, and trade y/y: +3.5% (unchanged from prior).

Despite this, markets have largely priced in a rate cut for December, driven by softer-than-expected non-farm payrolls and CPI data. The unexpected jump in unemployment claims overshadowed market reactions, signaling potential caution regarding the labor market’s resilience.

Weekly US Initial and Continuing Jobless Claims

• Initial jobless claims: 242K (vs 220K estimate; prior 224K, revised to 225K).
  • Highest since the first week of October.
  • 4-week moving average: 224.25K (vs 218.5K previous week).
• Continuing claims: 1.886M (vs 1.875M estimate; prior 1.871M).
  • 4-week moving average: 1.888M (highest since November 27, 2021).

However, taking into account today’s PPI, Pantheon Macroeconomics expect the upcoming Core PCE data for the latest month shows a modest increase of 0.13%, rounded to 0.1%, marking a slight slowdown from the 0.2% rise recorded the previous month. On a year-over-year basis, Core PCE is expected to remain stable at around 2.8%, reflecting steady underlying inflation trends for now.

Looking ahead, Pantheon Macroeconomics predicts a sharp decline in Core PCE during the first quarter of next year. This projection suggests that inflationary pressures could ease significantly in the near term, potentially influencing monetary policy decisions. If realized, this trend could provide additional room for the Federal Reserve to consider more accommodative measures, especially if other economic indicators point to slowing growth.

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.