USD weakens as jobless claims drop to 198K, beating 215K forecast

The US dollar retreated across major pairs following surprisingly strong labor market data, with initial jobless claims falling to 198K versus expectations of 215K, marking a 9,000 decline from the previous week. The 4-week moving average dropped to 205,000, reaching its lowest level since January 20, 2024, signaling persistent labor market strength. Continuing claims also decreased by 19,000 to 1.884 million, while the insured unemployment rate held steady at 1.2%. This robust employment data reinforces the Federal Reserve's cautious stance on rate cuts, as the resilient job market suggests the economy can withstand current monetary policy levels. Major dollar pairs showed mixed reactions, with traders reassessing expectations for Fed policy normalization in 2026. The data supports near-term dollar strength, though markets remain focused on upcoming inflation metrics for clearer directional cues.