Record High US Jobless Claims Sends the Euro US Dollar (EUR/USD) Exchange Rate Lower
UPDATE: The Euro US Dollar (EUR/USD) exchange rate slumped this afternoon by around -0.8%. This left the pairing trading at around $1.0858.
Data release on Thursday afternoon revealed that the number of Americans filing unemployment jumped to a record high for the second week running.
As further jurisdictions enforced stay-at-home measures to help fight the coronavirus pandemic, jobless claims topped six million. This followed last week’s 3.3 million rise in initial claims for unemployment benefits.
Over 80% of Americans are under a lockdown, dramatically increasing from less than 50% a few weeks ago. This sent unemployment higher, with 6.648 million citizens loosing their jobs.
The disappointing US employment data weighed on risk appetite and sent traders flocking back to the safety of the Dollar.
Commenting on today’s highly anticipated unemployment data, chief global strategist at JPMorgan Funds in New York, David Kelly said:
‘A rough look at the most affected industries suggests a potential payroll job loss of over 16 million jobs.
‘The loss would be enough to boost the unemployment rate from roughly 3.5% to 12.5%, which would be its highest rate since the Great Depression.’
Euro US Dollar (EUR/USD) Exchange Rate Slides Ahead of US Unemployment Data
The Euro US Dollar (EUR/USD) exchange rate edged around -0.3% lower this morning, leaving the pairing trading at around $1.0918.
The ‘Greenback’ gave up some of its recent gains this morning. However, still made gains against the Euro after markets were boosted by a 10% jump in oil prices.
Although, uncertainty surrounding the coronavirus pandemic and its effects on the global economy continued to keep the safe-haven Dollar strong.
Markets were spooked after US President Donald Trump warned the country faced a ‘painful’ two weeks in combating the coronavirus.
According to chief financial economist at MUFG Union Bank in New York, Chris Rupkey:
‘If America’s optimistic president is warning the worst of the pandemic is yet to come, what factory in their right mind would keep the doors open and workers on the payroll?
‘With only a few actual data points so far, the results indicate this is looking more like a depression than a garden-variety recession.’
Markets are going to be awaiting today’s US jobless claims. This is now expected to be a further blow to the country’s labour market.
Another record-breaking week of layoffs will spark further panic. This will weigh on risk appetite and send investors flocking towards the safe-haven US Dollar.
Euro (EUR) Slumps as Spanish Unemployment Soars
The Euro suffered losses after data revealed that Spain shed close to 900,000 jobs since the start of the coronavirus lockdown.
The country reported 898,822 people lost their job, with over half of them temporary since the country went into lockdown in mid-March.
Spain currently has the second-highest Covid-19 death toll after Italy. Earlier this week the country made lockdown measures stricter, banning all but essential workers from leaving the home to work.
The unemployment rate is now sat at its highest since April 2017. The official number of those unemployed rose to 3.5 million.
Commenting on the data, Transport Minister Jose Luis Abalos told RNE radio:
‘It is always a big problem and it is the double challenge we have: to fight the epidemic and to avoid the economic activity being swept away. We will have to work on relaunching the economy once we can get control of the epidemic.’
Euro US Dollar Outlook: Will Investors Flock Back to the Safe-Haven USD?
The US Dollar (USD) could make gains against the Euro (EUR) if jobless claims data sends markets into a panic.
If the US reports a higher than expected jump in jobless claims, investors are likely to flock back to the safety of the ‘Greenback’.
Meanwhile, on Friday morning, the single currency could suffer further losses following the release of services PMI figures.
If the service sector in the Eurozone plummets further than forecast into contraction, it will send the Euro US Dollar (EUR/USD) exchange rate lower.