The dollar increased on the back of positive data on the labor market and declining stock indices

In the US, data on the labor market renewed the dollar position. The upward trend in jobless claims has stalled. According to the report of the Labor Department, the growth of claims has dropped to 730K over the past week from 841K a week earlier, and the average monthly rate decreased by just over 20,000.

The positive picture was supplemented by the data on core durable goods orders. New orders for manufactured goods increased by 3.4% in January compared to the previous month, which is well above market expectations for a 1.1% rise. This is the 9th consecutive growth of the indicator and the largest since July 2020. Excluding transport, new orders increased by 1.4%, and excluding defense orders, the indicator increased by 2.3%.

After the positive data, the US dollar moved to growth. Treasury yields exceeded 1.55% for short while. The sterling showed the strongest decline among G10 currencies against USD. Long-term disregard of negative data in the UK caused a sharp pullback. The sterling's growth was largely driven by incoming vaccination data. But the economic backdrop, which isn’t yet showing signs of a rapid recovery, has been completely ignored.

Foreign workers are leaving the country at the fastest pace since World War II, causing a problem for the economy, according to the UK Office for National Statistics. According to the latest research, London lost 700,000 people in the last year. The situation is negative for the treasury, hospitality, and economic recovery.

Against the background of the growth of the US dollar and bonds yield, the stock market decreased again. Stocks decreased more than by 2% yesterday in Japan, South Korea, and Hong Kong. S&P 500 futures lost about 2.5%, with the stocks of the technology companies leading the way. The Nasdaq 100 fell by 3.6%.

Investors count on a sharper-than-expected global economic recovery, but many are increasingly concerned that accelerating inflation could trigger a tightening of monetary policy. Representatives of the Federal Reserve System have said that the increase of Treasury yields reflects only optimism so far, and emphasize that the central bank doesn’t plan to tighten policy prematurely.

Main market quotes:

S&P 500 (F) 3,817.88 -10.12 (-0.26%)

Dow Jones 31,402.01 -559.85 (-1.75%)

DAX 13,703.50 -175.83 (-1.27%)

FTSE 100 6,588.72 -63.24 (-0.95%)

USD Index 90.445 +0.310 (+0.34%)

• – US Core Personal Consumption Expenditures (m/m) (Jan) at 15:30 (GMT+2);
• – US Personal Consumption Expenditures (m/m) (Jan) at 15:30 (GMT+2).

by JustMarkets, 2021.02.26

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.