Australian Dollar, Stocks Brace for Multi-Million US Jobless Claims


US Jobless Claims Data, Market Risks Points:

  • The economic data are now catching up with the initial coronavirus impact period
  • New US jobless claimant numbers are all-but certain to be in the multi millions
  • Much of this bad news may well be in the price of risk assets already, but a hit seems inevitable

The coronavirus’ terrible spread has battered risk sensitive assets like commodity currencies and equity this year. Massive programs of government stimulus brought prices back from the dead despite the unstoppable drip-feed of economic data practically guaranteeing global recession, but Thursday’s US labor market numbers seem likely to pose an insurmountable hurdle.

Timely Purchasing Managers Index releases from around the world have already jolted markets with the scale of contraction. However, employment data are so crucial to everything else economic, from consumer spending through to monetary policy predictions, that it’s in these releases that fears tend to really crystalize in the markets.

1230GMT will bring official statistics on the numbers making initial claims for unemployment-related benefits in the week to March 21. The average expectation was that coronavirus shutdowns will see the claimant count soar to 1,500,000, from 281,000 in the previous week. However, California Governor Gavin Newsom told reporters on Wednesday that a million in his state alone had already applied for benefits this month. Economists at RBC Capital Markets tip a range of between five and ten million for new nationwide claims, according to a Reuters report.

A Big Hit, A Lasting Hit

Obviously this would represent a catastrophic economic hit and, whatever the White House may wish for when it comes to an early restart for the economy, likely an enduring one. Moreover, stimulus programs can only really boost recovery, they can’t fire the starting gun on it. Only a crucial, sustained fall in coronavirus infection rates can do that, and no one knows how long that’s going to take.

The big question when it comes to jobless claims data is now just how huge the hit is going to be. There can’t by now be much hope still priced in to markets as the number approach, but it’s hard to see an outturn in multiple millions being taken on the chin.

The Australian Dollar is perhaps the classic, widely traded and growth-correlated asset and has accordingly already suffered terribly from the coronavirus’ spread. Against the haven US Dollar the Aussie has already shed 40% this year, a big hit even by the standards of other growth bets such as equity and energy.

Australian Dollar Vs US Dollar, Daily Chart.

The past week or so has seen a modest bounce, as those stimulus programs were unveiled around the world. However, that bonce appears to have faded. Confirmation that multi-million new claimants were added to the roster last week could well see last week’s seventeen-year lows back in play very easily.

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— Written by David Cottle, DailyFX Research

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