The Euro to US Dollar (EUR/USD) exchange rate firmed by more than 0.90% on Thursday following the release of worse than forecast US jobless claims and retail sales data.
The Euro to US Dollar (EUR/USD) exchange rate reached a session high of 1.0684
The Euro made gains against the US Dollar following the release of disappointing data from the world’s largest economy. The single currency started the session having regained some ground against its major peers after economists deemed the single currency’s run of declines as overdone.
US data was mixed as one report showed that the number of Americans filing for unemployment benefits declined more than forecast last week and returned to a level, which was more consistent with signs suggesting that the nation’s labour market is improving.
According to the Washington based Labour Department, Initial jobless claims were shown to have fallen by 36,000 to a three week low of 289,000 in the week ending March. The figure repealed much of the preceding two weeks gains, which saw the number of claimants, rise well above the 300,000 mark.
‘Harsher than usual winter weather likely boosted the level in the previous two weeks. We doubt the underlying trend in claims has changed significantly. A sub-300k trend in claims implies continued strong employment growth and no let up in the downtrend in the unemployment rate,’ said Jim O’Sullivan, chief US economist at High Frequency Economics.
Traders widely shrugged off the jobless claims data and focused on the more negative retail sales data which showed that sales in the US declined for a third straight month.
According to the Commerce Department, retail sales declined for a third consecutive month. Sales declined by -0.6% in February adding to the 0.8% decline recorded in January. The drop in sales marks the first time since 2012 that retail sales have declined for three months in a row. Month on month sales were forecast to rise by 0.3%. On an annual basis, sales increased by 1.7%, a figure that was worse than the 3.5% rise forecast.
The weaker than expected data caused investors to push back expectations for a mid-year interest rate rise, which weighed upon the US Dollar.
Looking ahead, we can expect to see the US Dollar give up more ground ahead of next week’s Federal Reserve meeting.
‘I think we’re finally seeing some early signs of fatigue in the Dollar’s rally. Caution is on the rise ahead of next week’s Fed meeting. On the one hand, steady job growth has many expecting the Fed to lay the groundwork for an eventual rate hike. But this rapid rise in the Dollar could warrant a warning from the Fed as a potential threat to growth,’ said a senior analyst at Western Union Business Solutions.