Dollar down on higher jobless claims, market awaits inflation data and Fed’s interest rate decision.

US jobless claims spike to 1.5-year high at 261,000, surpassing economists‘ forecast of 235,000.

„Claims were a little higher than expected,“ said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, but „we’re still in consolidation mode… right now we’re just trapped.“

Greenback strengthens on anticipation of July rate hike, but pause expected after June meeting.

Worsening economic data may limit further rate increases by the U.S. central bank, even with high inflation pressures. Balancing these factors is crucial for monetary policy decisions.

Although inflation pressures remain high, deteriorating economic data could potentially restrict the number of future rate increases the US central bank can implement.

„There’s little opportunity for the Fed to raise rates again, either in June or July, and the market now favors July … the market doesn’t think it needs to do anything more because the economy looks like it’s going to weaken,“ Chandler said.

The euro advanced 0.75% against the dollar, reaching $1.0779, despite the euro zone economy being in a technical recession in Q1 2023. The single currency even touched $1.07870, its highest level since May 24.

The greenback declined 0.87% against the yen, reaching 138.94 yen.

The dollar index, which gauges the currency against six major counterparts, dropped 0.67% to 103,33. It dipped as low as 103.29, marking its lowest level since May 23.

Following the Bank of Canada’s unexpected interest rate hike to 4.75%, the Canadian dollar strengthen slightly. The greenback, in comparison, declined 0.09% against the Canadian dollar, trading at C$1.3358.

In addition to the Canadian dollar, the Australian dollar experienced gains as well. The Reserve Bank of Australia raised the cash rate to an 11-year high of 4.1% on Tuesday. The Australian dollar strengthened by 0.91%, reaching $0.6714.

According to expectations, the European Central Bank is anticipated to raise rates by 25 basis points (bps) in its upcoming meeting next Thursday. This could potentially be followed by another 25-bps increase in July, bringing the rates to 3.75%.

The dollar experienced a significant decline of 1.20% against the Swiss franc, falling to 0.899. This marks the lowest level since May 23.

In his final public appearance before the next interest rate decision, Swiss National Bank Chairman Thomas Jordan reiterated his dedication to combatting „stubborn“ inflation.

Against the Norwegian krone, the greenback fell 1.45% to 10.89, the lowest level since 22 May.

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