The Euro (EUR) rose against the US Dollar (USD) on Thursday after data revealed a higher-than-expected number of Americans filing for unemployment benefits. This unexpected rise in jobless claims sparked concerns about a potential slowdown in the US labor market, weakening the dollar's appeal.
According to the US Department of Labor, initial jobless claims climbed to 231,000 for the week ending May 4th. This figure surpassed economist expectations of 212,000 and marked the highest level since August 2023. The data adds to recent signs of a cooling labor market, following a decline in job openings and softer-than-expected payroll growth in April.
The weaker-than-anticipated jobs data triggered a decline in US Treasury yields. Investors often seek the safety of US bonds during economic uncertainty, driving yields higher. However, with the labor market showing signs of softening, the urgency for such safe havens lessened, causing yields to fall.
A decrease in Treasury yields weakens the dollar's attractiveness. Investors seeking higher returns tend to gravitate towards currencies backed by stronger economies and higher interest rates. With the US economic outlook appearing less robust, the euro gained ground.
This news follows comments from European Central Bank (ECB) Vice President Luis de Guindos, who expressed optimism about Europe's economic momentum. Guindos downplayed the possibility of a more aggressive rate cut by the ECB at their upcoming June meeting, further bolstering the euro.
While the rise in EURUSD is notable, analysts caution against overreacting to one data point. Upcoming economic releases, particularly inflation figures, will be crucial in determining the future trajectory of the US dollar and investor sentiment.