The US dollar maintained its high momentum at the end of the week after US jobless claims data published on Thursday night recorded a decline in figures compared to market expectations, thus further increasing expectations that the Fed will keep interest rates on hold for the next few months.
At 9.45 am, the US dollar index (DXY) was at 99.357 points, stable since it opened in early trading on Friday in the Asian session.
Initial claims for state unemployment benefits in the United States fell by 9,000 to 198,000 for the week ended January 10, based on seasonally adjusted data from the US Labor Department. The figure was much lower than market expectations of 215,000.
The reading shows that the US labor market is still at a strong level, thus prompting market participants to adjust their positions and supporting the strengthening of the US dollar. However, the jobs data is seen as potentially overstating the true strength of the labor market due to the weakness of the birth-death model.
The annual wage revision is expected to reveal a weaker labor market, but the report will be released only with a significant delay.
Fed funds futures are now pushing back expectations for another rate cut into June, driven by a series of improving labor data and Fed policymakers remaining cautious about lingering inflationary pressures.
The December jobs report released on Friday showed the unemployment rate fell more than expected to four percent, further reinforcing the picture of a stable US labor market.
Fed policymakers continue to emphasize the priority of efforts to reduce inflation, with the assessment that price pressures remain too high despite recent encouraging economic data.
At the same time, uncertainties and risks to the inflation and employment mandates remain.
Risk sentiment also improved after the US President said he had no plans to fire Fed Chairman Jerome Powell, despite a criminal investigation by the Justice Department, easing concerns of political interference in the central bank.
In geopolitical developments, concerns over Iran eased somewhat following signs of a reduction in violence against protesters and the absence of any large-scale executions at this time, prompting a wait-and-see approach by markets.
Meanwhile, the US and Taiwan have reached a new trade deal that is expected to support a major restructuring of the US semiconductor sector, with positive implications for the global technology supply chain.
