The dollar declines on weak US labor market data

The pound gained 1%, to $1.2565 against the dollar following the BoE's decision to hold the key rate steady at 5.25%.

By Nadia Elbilassy | @Nadia Elbilassy | 10 May 2024

Market open
  • Investors price in larger rate cuts than expected from the BoE

  • Dollar edged up 0.03% against yen after significant drop last week.

  • Investors see BOJ's comments as a signal to monitor dollar-yen exchange rate closely.

The Dollar

The dollar faced a decline against most currencies on Thursday as economic indicators pointed to further softness in the U.S. labor market.

US unemployment claims rose by 22,000 to reach a seasonally adjusted 231,000, marking the highest level since the end of August last year and surpassing economists' expectations of 215,000 in a Reuters poll.

These figures come on the heels of last week's disappointing U.S. payrolls report.

The Pound

The sterling strengthened, gaining 1% at $1.2565, Afte the Monetary Policy Committee of the BoE voted 7-2 to maintain the central bank's key policy rate at 5.25%, its highest level in 16 years.

BoE Governor Andrew Bailey remarked that there's a possibility the central bank might need to implement larger rate cuts than anticipated by investors.

The Yen

The dollar inched up by 0.03% against the Japanese yen, reaching 155.52, as hawkish comments from the BoJ helped alleviate the yen's decline.

This comes after the dollar experienced a significant 3.4% drop against the yen last week, marking its most substantial weekly decline since early December 2022.

Investors interpreted BOJ Governor Kazuo Ueda's statement as a signal to closely track the dollar-yen exchange rate, as he emphasized the central bank's intention to closely monitor the yen's recent depreciation when making decisions about monetary policy.