Dollar Index on Course for Weekly Gains

Unemployment claims beat forecasts

According to the US Department of Labor, the jobless claims for the week ending July 31, 2015, came in at 270,000. This was 3,000 above the previous week’s number, and it beat the market expectations of 272,000. According to the ISM (Institute of Supply Chain Management) on August 5, the US ISM Manufacturing PMI (purchasing managers’ index) was 60.3, beating the forecast of 56.3—the highest reading in nearly a decade.

The graph below depicts the relation between the non-manufacturing PMI, which is a leading indicator to the monthly average of the weekly unemployment claims.

Dollar Index on Course for Weekly Gains

US dollar index biased toward a rally

Even after the manufacturing PMI failed to rise to expected levels, the US dollar index is on track for another week of gains. This is driven primarily by Atlanta Federal Reserve president Dennis Lockhart’s hawkish comments on a rate hike. His comments gave the US dollar index a boost on August 4, coupled with the non-manufacturing PMI, which released better than forecasts.

Impact on market

Exchange-traded funds that are related to the S&P 500, such as the SPDR S&P Retail ETF (XRT) and the Technology Select Sector SPDR ETF (XLK), fell by 1.97% and 0.99%, respectively.

The day after the release of the PMI numbers, there was some major movement in stocks like Transocean Ltd. (RIG) and Michael Kors Holdings Limited (KORS), which rose by by 12.16% and 10.84%, respectively. Among the media stocks, Discovery Communications C Inc. (DISCK) rose by 4.68%.