US dollar strengthens on jobless claims

The main theme in FX markets was US dollar strength on the back of a much firmer-than-expected unemployment claims reading.

Jobless claims were down 10,000 to 316,000 which was well below consensus of 331,000 and was also a two-month low. There were also positive readings for Chicago PMI and consumer sentiment, but durable goods orders disappointed. While the dollar index gained some ground it still remained below 81.

USD/JPY was the biggest beneficiary of the move as its pushed through 102. The pair traded to a high of 102.19 and was last above 102 back in May. This leaves the May high at 103.74, which will be the next level to look out for. Out of Japan this morning we’ve had retail sales figures which came in roughly in-line with consensus. Weekly fund flows data has also shown a sharp rise in Japan buying foreign bonds, while foreign buying in Japan bonds dropped sharply. This is the result Japanese officials would want to see and could result in further yen weakness today. There have also been some big gains in EUR/JPY which is trading above 138 now.

AUD comes off lows after capex surprise

AUD/USD has been flat all morning ahead of local capex numbers. The private capital expenditure reading came in at +3.6% which was above estimates of -1.1%. This triggered a recovery in AUD/USD which is now back above 0.91. However, I still feel the local currency will be sold into strength in the near term. With the capex numbers now out of the way, the AUD still has plenty of event risk coming up with China industrial profits, Philippines GDP and South Korea current account data due out.

GBP/USD continued to climb despite some mixed UK economic data.  Cable spiked to a high of 1.633, clearing October highs and now firmly has January highs in sight. The BoE financial stability report along with BoE Governor Mark Carney’s speech will be the key events for the pound today. Once again any hawkish comments or further signs that the UK economy will continue to improve rapidly will push the pair higher. On the USD side, I expect a quiet session with markets closed for the Thanksgiving.

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