|

Jobless Claims Analysis: At 6.648 million, this corona-carnage is here to stay, dollar implications

  • US jobless claims are at 6.648 million in the week ending March 28.
  • Devastating data is set to continue beyond April and cause long-term damage.
  • The impact on the dollar depends on policymakers’ reactions.

Catastrophic data – no superlative is exaggerated for these horrendous weekly jobless claims figures. The number of claims doubled in comparison to the previous week, which already a historic record.

This comes on the background of reports claiming that various states are unable to process requests at a satisfactory pace. 

Jobless claims chart updated on April 2 2020

The US economy has been put into an induced coma – social distancing to fight the virus – but may have a hard time waking up. Returning to pre-crisis output and employment may take a significant period of time.

President Donald Trump has extended the stay-at-home guidelines until the end of April, with most states already imposing shelter in place orders. However, it will take time until some restrictions are lifted – and only gradually. According to New York Governor Andrew Cuomo, the death toll from COVID-19 will likely remain high until the summer.

People that are temporarily out of work may find that staying at home is not an ephemeral phenomenon. And when the economy wakes up, the businesses that have employed these people may be out of business.

While the Federal Reserve seems to have prevented a financial crisis, the economic crisis continues unfolding. For stock markets, the terrible jobless claims statistics are bad news.

What about the dollar?

The answer depends on politicians. Congress has passed a $2.2 trillion fiscal package – a huge undertaking that may be insufficient. With such figures, additional help will likely be needed to keep the masses of the unemployed content and able to hold on. Expenditure would also be warranted to support businesses from shutting shop and from employers to fire workers.

The scale is proving gargantuan.

If Washington works toward a new package, it will help stem the tide and weigh on the safe-haven dollar. While politicians often move slowly, the crisis has accelerated their responses. Democrats are already pushing for a fourth stimulus deal, and President Donald Trump is touting a massive infrastructure bill.

However, Senate Republicans are reluctant to move forward. Without immediate help from the federal government, the pain to the economy and stocks would worsen. And for the greenback, it means more gains.

See Market update: Assessing the damage done by Covid-19

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

More from Yohay Elam
Share:

Editor's Picks

EUR/USD looks sidelined around 1.1850

EUR/USD remains on the back foot, extending its bearish tone and sliding towards the 1.1850 area to print fresh daily lows on Monday. The move lower comes as the US Dollar gathers modest traction, with thin liquidity and subdued volatility amplifying price swings amid the US market holiday.

GBP/USD flirts with daily lows near 1.3630

GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.

Gold battle around $5,000 continues

Gold is giving back part of Friday’s sharp rebound, deflating below the key $5,000 mark per troy ounce as the new week gets underway. Modest gains in the US Dollar are keeping the metal in check, while thin trading conditions, due to the Presidents Day holiday in the US, are adding to the choppy and hesitant tone across markets.

Bitcoin consolidates as on-chain data show mixed signals

Bitcoin price has consolidated between $65,700 and $72,000 over the past nine days, with no clear directional bias. US-listed spot ETFs recorded a $359.91 million weekly outflow, marking the fourth consecutive week of withdrawals.

The week ahead: Key inflation readings and why the AI trade could be overdone

It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.

XRP steadies in narrow range as fund inflows, futures interest rise

Ripple is trading in a narrow range between $1.45 (immediate support) and $1.50 (resistance) at the time of writing on Monday. The remittance token extended its recovery last week, peaking at $1.67 on Sunday from the weekly open at $1.43.