On Thursday, the U.S. Dollar reached fresh seven-week peaks in response to robust economic data. This significantly reduced speculation about the Federal Reserve's potential easing measures. Market confidence in a possible U.S. debt ceiling agreement to prevent a looming default also contributed to the Dollar's strength.
Positive U.S. Jobless Claims and Business Index Reports
Lower-than-predicted U.S. initial jobless claims in the recent week were among the encouraging reports unveiled on Thursday. The jobless claims stood at 242,000, lower than the forecasted 254,000. A less severe drop in a business index from the Philadelphia Federal Reserve was also reported. The index fell to -10.4, contrary to market predictions of a -19.8 contraction.
Seven-Week High for Dollar Index and Five-Month Peak against Yen
The Dollar index hit a new seven-week peak of 103.38 and settled at 103.34, an increase of 0.5% after the positive economic data. Furthermore, against the yen, the Dollar escalated to a fresh five-month peak of 138.39 post-data and was last noted up 0.5% at 138.35.
Federal Reserve's Interest Rate Predictions
Traders are presently factoring in a 20% likelihood that the Federal Reserve will raise its interest rate at its June gathering. This marks a significant shift from a month ago when the markets were foreseeing a 20% chance of a rate cut. As for the Fed's December meeting, traders have priced the rate at 4.525%, suggesting a 55 basis point reduction by the end of the year. This represents a decrease of about five basis points from the previous day.
U.S. Debt Ceiling Talks Gain Momentum
The ongoing debt ceiling discussions also remained in focus. President Joe Biden and leading U.S. congressional Republican Kevin McCarthy expressed their determination on Wednesday to reach a swift deal to raise the government's $31.4 trillion debt ceiling. This followed an agreement to negotiate, breaking a months-long stalemate directly.