The dollar clawed back losses and rebounded from a three-month low after a stronger-than-expected batch of US economic data, including a surprise drop in weekly jobless claims, sparked short-covering in the currency.
Initial jobless claims fell by 6,000 to 206,000 in the week ended August 15, comfortably beating the median forecast of 210,000. The reading offered a fresh signal that the labor market remains resilient despite a string of softer data earlier in the month, and it arrived alongside a solid Philadelphia Fed business outlook survey and an upbeat July leading indicators report.
The combination was enough to trigger short-covering in the dollar, which had been sitting near a three-month low heading into the release. A roughly 2% jump in WTI crude oil to a one-month high added a further layer of support, since rising energy prices tend to lift inflation expectations and, with them, the case for the Fed to stay cautious on cutting rates.
The rebound wasn’t one-directional, though — dovish remarks from San Francisco Fed President Mary Daly, who said she wasn’t seeing evidence of a need for preemptive rate hikes, capped some of the dollar’s gains. The mixed signals leave traders parsing whether Thursday’s bounce marks a genuine turning point or just a pause within the broader downtrend that has dominated the dollar since mid-August.
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