The dollar index (DXY00) today is down by -0.26%. The announcement of a ceasefire between Israel and Lebanon knocked WTI crude oil prices down more than -3% today and lowered inflation expectations, which might persuade the Fed to ease monetary policy, a negative factor for the dollar. Also, today’s US economic news, showing a bigger-than-expected increase in weekly jobless claims and a larger-than-expected downward revision to Q1 nonfarm productivity, is bearish for the dollar.
US weekly initial unemployment claims rose +13,000 to a 3.75-month high of 225,000, showing a weaker labor market than expectations of 215,000.
More News from Barchart
US Q1 nonfarm productivity was revised downward to 0.3% from the previously reported 0.8%, weaker than expectations of 0.4%. Q1 unit labor costs were unexpectedly revised downward to 1.8% from 2.3%, weaker than expectations of an upward revision to 2.4%.
Late Wednesday, the US said Israel and Lebanon agreed to a ceasefire if Hezbollah also stops fighting and withdraws its militants from areas near the border with Israel. The agreement would require the Lebanese army to take over after the withdrawal of Israeli troops. Iran insists a deal with the US requires a ceasefire in Lebanon.
The swaps markets are discounting the odds at 2% for a +25 bp rate cut hike at the next FOMC meeting on June 16-17.
EUR/USD (^EURUSD) today is up by +0.32%. Today’s weaker dollar is supportive of the euro. Also, today’s -3% plunge in crude oil prices is bullish for the Eurozone economy and the euro, as Europe imports most of its energy. Today’s weaker-than-expected report on Eurozone Apr retail sales is negative for the euro.
Eurozone Apr retail sales fell -0.4% m/m, weaker than expectations of -0.3% m/m.
The markets are discounting a +97% chance for a +25 bp rate hike by the ECB at the next policy meeting on June 11.
USD/JPY (^USDJPY) today is down by -0.09%. The yen is moving higher today amid weakness in the dollar. Also, today’s -3% plunge in crude oil prices benefits Japan’s economy and the yen, as Japan imports most of its energy. In addition, today’s report from Bloomberg said the BOJ is leaning toward raising interest rates at this month’s policy meeting, which is bullish for the yen. Finally, lower T-note yields today are supportive of the yen.
