Forex Markets Gain Despite Jobless Claims Skyrocketing

Forex Markets Gain Despite Jobless Claims Skyrocketing

Published: November 25th, 2020

 Three factors shaped the overall market behavior of the week ending Saturday, November 21. The U.S. recorded higher than expected unemployment numbers; stocks were largely uncertain due to an unclear path forward on stimulus plans. And, both the euro and the Sterling Pound remained upbeat on the backdrop of coronavirus vaccine hopes.

The forex markets surged moderately on Friday, November 21, with the most significant currencies attaining monthly highs against the greenback. These jumps came despite U.S. unemployment claims shooting above expectations.

Both the euro and the Great Britain Pound remained afloat following increasing hope of successful COVID-19 vaccines, with several candidates posting impressive efficacy data.

Meanwhile, stocks danced an uncertain jig the entire day due to the continued unpredictable policy stance. The GOP, Treasury Secretary Steven Mnuchin, and the Democrats are yet to agree on a stimulus package despite a looming recession.

Initial Job Claims Make a Slight Leap

Initial unemployment claims have been dropping in the U.S. for several consecutive weeks now. Markets were hoping for the precedent to continue, with analysts hoping that the week would have brought the figures anywhere near a 710,000 drop. Instead, the Labor Department numbers showed an increase from the previous week's figures to 742,000.

Despite the little increase, the overall jobless numbers now stand at 6.3 million, a pandemic record low. However, the unemployment claims still cast some doubt over the economy's actual direction, considering that the numbers continue rising.

The new claims numbers have been accounted for in reversing the figures released earlier. Overall, they are dismal, and forex brokers and traders will most likely look at them closely in the weeks to come.

The downturn coincides with the delicate time in the U.S. when coronavirus is surging. The country has broken all records in the past three weeks or so. On Monday, November 23, the U.S. marked the 20th day that the country has seen new infection rates top 100,000 cases.

The Great Britain Pound and the Euro Gaze Past Virus Worries

Despite the shocking and worrisome rise in the number of new coronavirus cases, the euro seemed stable. The new pandemic figures have jolted administrations worldwide, prompting numerous American states, including California and New York, to impose new restrictions.

On Monday, November 16, California Governor Gavin Newsom announced an emergency brake to the state's Blueprint to a Safer Economy. The action imposed new restrictions on businesses across the state. Besides, it now means that masks are mandatory when stepping outside. However, the mask mandate comes with a few limited exceptions.

Newsom's announcement comes in the wake of an admission that the troubling spike of cases in November has surpassed the corresponding increase in June. The governor said that the state's rate of new infections might surpass the mid-June's hospitalization figures.

The increase in new cases made California the second state in the U.S. to shoot past a million confirmed infected individuals last week. The total number in the country neared 12 million.

Meanwhile, New York announced a reversal back to former restrictions on Wednesday, November 11. While announcing the restrictions, New York Governor Andrew Cuomo said that establishments that have state liquor licenses such as bars and restaurants, and gyms now have to close by 10 p.m. The new regulations took effect on Friday, November 13.

Hope in the Vaccine Candidates

Despite the strict restrictions, individuals trading the euro seemed to fair relatively well. The EUR/USD pair looked to be on track to a monthly high above 1.19 on Friday, November 20. However, according to market experts, the pair's rise is also due to the uncertainty between the U.S. Federal Reserve and the country's Treasury Department over another economic stimulus.

According to Anthony Gallagher, a staffer at Securities.io, traders are looking past the current situation. Instead, they concentrate on the future that is currently filled with the promise of three vaccine candidates with exceptional prelim data.

Two weeks ago, two American pharmaceutical companies Pfizer and Moderna, announced that their vaccine candidates are 95% and 94.5% effective, respectively. On Monday, November 24, AstraZeneca, a British-Swedish multinational pharma, announced that its vaccine candidate is 70% effective.

Medics now tout the AstraZeneca-University of Oxford collaboration as a game-changer. Despite its considerably lower efficacy, it is safer. Available data indicate that it has minimal side effects among volunteers.

Besides, it is easier to store compared to the Pfizer and Moderna vaccine candidates. This crucial factor makes it ideal for most countries, especially the more impoverished nations. Also, it is considerably cheaper. A dose costs $4, making it cheaper than the other two.

Stocks Sunk Amid Stimulus Confusion

Overall, Friday, November 20, was a good day for European equities markets. The same cannot be said about Wall Street, which took a downward turn for much of the day's trading session. One market analyst said the dive is because of the confusion reigning in the U.S.

According to the analyst, there is no concrete sign of future stimulus efforts. If anything, the Fed is keen to let numerous emergency lending programs lapse at the end of the year.

The U.S. Treasury has requested the Fed Reserve to return about $500 billion in unspent COVID-19 emergency funds. Fed Chair, Jerome Powell, has opposed the move, reiterating that the money can boost the economy.

The stash is part of the $2.2 trillion CARES Act package that Congress approved to establish emergency lending facilities through guaranteed loans. Reports indicate that though the funds helped calm nervous markets, only $25 billion was used.

Final Thoughts

The markets gained on Saturday, November 21, despite jobless claims rising unexpectedly. Experts think the upbeat mood is because of the hope inspired by the positive news from pharmaceutical companies. Two weeks ago, two vaccine initiatives announced that their coronavirus vaccine candidates showed more than 90% efficacy from preliminary data. Traders have opted to concentrate on the latter information considering the much hope it bears.

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