The Euro tumbled against the dollar in yesterday’s trading session after unemployment claims pointed to a continuing robust U.S. jobs market and other data showed growing labor costs, indicating the Federal Reserve has further to go in raising interest rates to reign in record inflation
The yield on two-year Treasury notes, which are sensitive to interest rate expectations, shot to levels last seen in July 2007 as the market anticipates the Fed will raise rates further to curb rising consumer prices.
Initial claims for state unemployment benefits dropped 2,000 to a seasonally adjusted 190,000 for the week ended Feb. 25, the Labor Department said. It was the seventh straight week that claims remained below 200,000. Economists polled by Reuters had forecast 195,000 claims for the latest week.
"The labour market shows no fresh signs of deterioration with minimal job layoffs despite the news of big tech firings the last several months, and this will harden the resolve of Fed officials to slow economic demand down with higher interest rates," said Christopher Rupkey, chief economist at FWDBONDS in New York.
As we enter today’s trading session the European currency is under further pressure after the release of the producer price index from the Euro zone which hit the market at -2.8 percent against analysts expectations for a number of -0.3 percent. The reding was also well below last month’s figure of 1.1 percent.
The yearly figure didn’t fare much better coming in at 15 percent against consensus for a number of 17.7 percent and also below last month’s reading of 24.6 percent.
Looking further ahead today, the main drivers of the EUR/USD currency pair will be the release of the ISM services figure from the US which is a key indicator of business confidence and a good reading may put further pressure on the Euro as the trading week comes to a close.