In a day of choppy trading, the U.S. dollar rose as investors evaluated the latest labor market data and comments from Federal Reserve officials regarding the future path of interest rates. Meanwhile, Bitcoin continued its impressive rally, edging closer to the $100,000 mark.
Labor Market Insights
Weekly initial jobless claims fell by 6,000 to a seasonally adjusted 213,000, marking a seven-month low and coming in below the 220,000 estimate by economists. This drop suggests a rebound in job growth following disruptions caused by hurricanes and labor strikes last month. However, the report also highlighted labor market slack, with unemployment rolls growing to their highest levels in three years, indicating it is taking longer for the unemployed to find new jobs. This provides the Federal Reserve with some leeway to consider another rate cut in December.
Dollar’s Performance
The dollar index, which measures the greenback against a basket of currencies, rose 0.1% to 106.73. The euro fell 0.28% to $1.0513. Brad Bechtel, global head of FX at Jefferies in New York, noted that while some of the initial euphoria from Trump’s trade policies is fading, portfolio rebalancing continues to drive demand for the dollar.
Bitcoin’s Surge
Bitcoin has surged more than 40% since the U.S. election, driven by expectations that President-elect Donald Trump will ease regulatory constraints on cryptocurrencies. Bitcoin was last up 2.28% to $96,616.34, after reaching a record high of $98,367.
Fed’s Outlook
Recent comments from Federal Reserve officials, including Chair Jerome Powell, suggest a slower pace for future rate cuts. Concerns about potential inflation from Trump’s policies have also contributed to the dollar’s strength, which reached a one-year high of 107.07 last week. European Central Bank policymaker Francois Villeroy de Galhau stated that tariff hikes under the new Trump administration do not alter the inflation outlook in Europe.
Market Expectations
Expectations for rate cuts have been adjusted, with markets now pricing in a 55.5% chance of a 25-basis-point cut at the Fed’s December meeting, down from 72.2% a week ago. Federal Reserve Bank of New York President John Williams and Federal Reserve Bank of Richmond President Tom Barkin have both expressed views on inflation and interest rates, adding to the market’s cautious stance.
Safe-Haven Currencies
Safe-haven currencies like the Japanese yen and Swiss franc strengthened amid potential signs of escalating conflict between Ukraine and Russia. The dollar weakened 0.93% against the yen to 153.98 and fell 0.07% against the Swiss franc to 0.883. Bank of Japan Governor Kazuo Ueda emphasized the importance of considering foreign exchange rate movements in economic and price forecasts.
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