US Dollar Edges Higher As Markets Brace for Jerome Powell Testimony, Cooling Labor Market

The US dollar recorded a modest gain against its major currency rivals as financial markets were trading relatively flat at the opening bell on Thursday. Despite some easing in recent weeks, the buck is still one of the top-performing currencies in global forex markets. For now, it is about the data and Federal Reserve Chair Jerome Powell’s upcoming testimony.

According to the Bureau of Labor Statistics (BLS), initial jobless claims dipped by 2,000 to 229,000 in the week ending June 18. This was slightly higher than the market forecast of 227,000.

But market experts are looking at the four-week moving average, which removes week-to-week volatility, advanced to 223,500. This metric has risen every week since the beginning of April, suggesting that the labor market could be cooling off.

Continuing jobless claims rose to 1.315 million in the week ending June 11.

On the housing front, mortgage applications rose 4.2% in the week ending June 17, while the 30-year mortgage rate climbed to 5.98%, according to the Mortgage Bankers Association (MBA).

All eyes will be on Fed Chair Powell’s testimony in Congress on Thursday. Markets paid close attention to his appearance on Capitol Hill where he conceded that a recession is possible, but that is not the intention of the Eccles Building.

“At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” the Fed chief said in remarks for the Senate Banking Committee. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”

“It’s [recession[ certainly a possibility. It’s not our intended outcome at all, but it’s certainly a possibility, and frankly the events of the last few months around the world have made it more difficult for us to achieve what we want, which is 2% inflation and still a strong labor market.”

The US Treasury market sank on Thursday, with the benchmark 10-year yield down 7.1 basis points to 3.085%. The one-year bill shed 5.3 basis points, while the 30-year bond shed 3.1 basis points to 3.212%.

The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, advanced 0.24% to 104.45, from an opening of 104.20. The index is poised for a weekly gain of nearly 0.8%, lifting its year-to-date rally to around 9%.

The USD/CAD currency pair edged up 0.07% to 1.2957, from an opening of 1.2947, at 13:27 GMT on Thursday. The EUR/USD dropped 0.45% to 1.0521, from an opening of 1.0569.

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