USD Analysis: Initial Jobless Claims Up; Dollar Down Across the Board

NEW YORK (Forex News Now) – The slight downward pressure on the dollar caused by yesterday’s quantitative easing announcement was intensified today as initial jobless claims rose for the past week. As a result, the dollar has fallen so far against all major currencies in global forex trading.

The U.S. Department of Labor announced today that initial jobless claims for the week ending on October 29^th rose by 20,000 to 457,000 – up from an upwardly-revised figure of 437,000 the week before. Analysts had forecast a rise to 443,000 for last week.

The news comes a day after the Federal Reserve announced an eight-month, $600 billion asset purchase program designed to stimulate a flagging economy plagued by persistent high unemployment and sluggish growth.

Together, both global forex trading news items sent the dollar down, falling against virtually every major currency.  The dollar is down 0.87% against the euro, to 1.426, and fell 0.67% against the yen to 80.6. The dollar also dropped 1.06% to 1.6275 on the pound and 0.32% to 1.0014 on the Canadian dollar.

Drops against the Aussie, New Zealand dollar, and Swiss franc were also witnessed. The U.S. dollar index is down 0.9%, to 75.803.

Prior to the initial jobless claims announcement, the dollar had been holding steady following the quantitative easing 2 news. This was more than likely due to the assumption that the QE2 announcement was largely predicted, and as such its impact had already been priced into the dollar to a significant degree.

The rising weekly claims, though, has given traders fresh data to fuel a pessimistic outlook for the economy. Of course, this momentum will likely be reversed at the end of the week, when the government releases its October employment report.  Last week’s poor numbers fall outside of the survey period and will not impact the overall report.

Meanwhile, productivity rose by 1.9% annually after dropping by 1.8% in the second quarter.  Also, unit labor costs fell by 0.1%, suggesting that inflation pressures have declined somewhat following a 1.3% rise in the second quarter.  The Federal Reserve closely watches the unit labor cost data, as it is an indicator of inflationary pressure.

One disconcerting conclusion from these reports is this: Unemployment remains stubbornly high because workers as a whole are being more productive and working longer hours, instead of businesses hiring new workers and creating new jobs.

If this trend persists, global forex trading markets could see continued losses for the dollar well into 2011.