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U.S. Dollar Tanks As Traders Worry About More Job Losses

By Kathy LienCurrenciesMar 26, 2020 04:51PM ET
www.investing.com/analysis/us-dollar-tanks-as-traders-worry-about-more-job-losses-200519401
U.S. Dollar Tanks As Traders Worry About More Job Losses
By Kathy Lien   |  Mar 26, 2020 04:51PM ET
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The U.S. dollar traded lower against all of the major currencies today after jobless claims topped 3.2 million. We’ve never seen weekly jobless claims at these levels before. They are more than four times greater than the prior high set in October 1982 and double the 1.5-million forecast. In anticipation of this blowout report, Federal Reserve Chairman Jerome Powell gave a rare broadcast interview on NBC’s Today show this morning to reassure investors that the Fed is “not going to run out of ammunition” and they still have “policy room in other dimensions to support the economy.”
 
The market responded well to this message as stock futures shrugged off post-data losses to close the New York session deep in positive territory. The U.S. dollar ended the day down 1% against the Japanese Yen, Sterling, Australian and New Zealand dollars. USD/JPY dropped below 110. There’s strong support at 109 but we see the pair falling below 107.
 
Considering that the next few jobless claims reports could be even worse, with weekly claims well above 5-maybe-7 million, many investors are wondering if today’s rally in stocks is indicative of a bottom. It is hard to imagine that being the case as this is only the start of a long period of very high jobless claims. The sell-off in Treasury yields and decline in the U.S. dollar indicates that investors are not convinced that Powell’s pledge to keep buying and the White House’s economic stimulus package will be enough to turn the markets around. 
 
With that said in the very near term, the rally could extend into Friday, especially as the House will be taking up the White House’s Coronavirus Stimulus bill tomorrow and, according to Nancy Pelosi, the $2-trillion package is expected to pass with strong bipartisan support. U.S. personal income and personal spending numbers are scheduled for release on Friday, while softer average hourly earnings growth and retail sales signal weakness, declines in February data have been modest as they do not reflect the true COVID-19 impact. 
 
Sterling rebounded as the Bank of England kept interest rates unchanged at a record low of 0.1% and its asset purchase program steady at GBP200 billion. Governor Andrew Bailey warned of a large and sharp downturn with the risk of longer term damage to the economy. The sharp decline in the exchange rate could also lead to a long-term increase in inflation and as such, the central bank stands ready to respond further as necessary. UK retail sales dropped 0.3% last month with core spending falling 0.5%. These numbers were worse than expected but sharper declines are expected in the coming months.
 
EUR/USD continued to march above 1.10 versus the U.S. dollar. There’s little news to support the rally, leaving U.S. dollar weakness the only reason for the move. Spain’s coronavirus death toll officially passed China’s, becoming the second highest in the world. The health system is collapsing underneath the weight of the disease and the economy will follow. In Italy, the death toll rose above 7,000 (Spain has 4,000) but the number of new cases fell for the fourth day in a row, raising hopes that the curve is flattening. Unfortunately, the economic toll for both countries and the Eurozone as a whole will be severe, more so than other parts of the world. We continue to look for a decline in euro but the best opportunities may be found in euro crosses. 
U.S. Dollar Tanks As Traders Worry About More Job Losses
 

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U.S. Dollar Tanks As Traders Worry About More Job Losses

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Comments (23)
Lukman Firdaus
Lukman Firdaus Mar 30, 2020 11:15PM ET
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money $ 876.000
Chris Black
ChrisBlackforex Mar 29, 2020 12:34AM ET
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All Pair Against the Dollar will Raise ? Dollar Inflation 6.2 Trillion Dollar New Money Print for the next 9 month Crazy? But i like it! excuse my plan
Loutchy Mattei
Loutchy Mattei Mar 27, 2020 7:30AM ET
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Thanks. € hit 1.10 as you mentioned earlier. you're good.
Sirvan Mohammadi
Sirvan Mohammadi Mar 27, 2020 1:58AM ET
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In my opinion, this trend will continue for about a month, after which the stock will stabilize and the support package will only prevent further decline and expect the uptrend to be unacceptable at present.
sina sadeghi
sina sadeghi Mar 27, 2020 1:53AM ET
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in this time period all of asset lose the correlation with each other like safe heaven
Nick Gee
Nick Gee Mar 26, 2020 11:42PM ET
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When the FED and govt throws 6 TRILLION into the market in record time without blinking....you know there's massive problems.Dow to 10K over the next couple months...IMO
Peter Antognoni
Peter Antognoni Mar 26, 2020 11:42PM ET
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Just as the Dollar is being pushed down by the Feds medlling and sabotaging the DOW will follow that trend, a lose-lose proposition for everyone but our increaingly socialistic government officials and employees whose compensation packages remain intact in what may may the 1929 crash look like a comparative picnic.10,000 is realistic target by Summer. God help America because its bloated government surely is not!
bd bd
bd bd Mar 26, 2020 9:30PM ET
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With all this printing of US Dollars, it will soon be only good for replacement of toilet paper.
John Niemokta
John Niemokta Mar 26, 2020 9:30PM ET
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Im very concerned we will see massive inflation becuase of this relief plan.
Michael Redden
Michael Redden Mar 26, 2020 7:07PM ET
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Half of those 3mil unemployment claims are from quarantined employed americans panicking for money. They are still employed waiting out this 2 weeks, ask your friends
Rc Cc
Rc Cc Mar 26, 2020 7:07PM ET
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so they count claims that haven't been verified yet?  if you haven't been laid off, and you try to claim, i would think they don't count the claim till they verify with employer that your unemployed?
PLAY DIRTY
PLAYDIRTY Mar 26, 2020 7:04PM ET
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Drug market... we know.
anders larsen
anders larsen Mar 26, 2020 6:39PM ET
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Yep, I think Eurusd spike is likely to end soon. The Eurozone does not have its house in order and US is speaking with one voice and should again be the no one safe haven. In Eurozone we need to see more carnage before the Germans will step in. The are not happy.
 
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