Euro surges above 1.07

The Euro surged against the US dollar in yesterday’s trading session, pushing back over the 1.07 mark after data showed that U.S. jobless claims rose more than expected in the latest week, though the market was generally viewed as consolidating ahead of key inflation data and the Federal Reserve’s interest rate decision next week.

The number of Americans filing new claims for unemployment benefits surged to the highest level in more than 1-1/2 years last week with a 28,000-claim jump to a seasonally adjusted 261,000 which was much higher than analysts estimates for a figure of 235,000 claims for the latest week.

“Claims were a bit higher than expected,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, but “we’re still in a consolidation mode, right now we’re just trapped.”

The greenback has been bolstered by expectations that the Fed will hike rates in July, though it is widely expected to pause hikes at the conclusion of its June 13-14 meeting.

But worsening economic data may also limit how many further rate increases the U.S. central bank is able to achieve even if inflation pressures remain high.

“There is a small window of opportunity for the Fed to raise rates again, whether it's June or July, and the market now favours July. The market doesn’t think there’s anything more to be done because the economy looks set to weaken,” added Mr Chandler.

Looking further ahead today as we head into the weekend, the main drivers of the EUR/USD currency pair will be the release of a monetary speech by Luis De Guindos who is the Vice-president of the European Central Bank and the focus for traders will be any hints on a potential rate hike from the ECB next week.

In the American session there is no major news scheduled and traders are focused on the Fed rate decision next week.