The number of Americans filing for unemployment benefits rose more than expected last week, but the underlying trend continued to point to sustained labor market strength.
Initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 266,000 for the week ended July 23, the Labor Department said on Thursday. Claims for the prior week were revised to show 1,000 fewer applications received than previously reported.
Economists polled by Reuters had forecast initial claims rising to 260,000 in the latest week. Claims have now been below 300,000, a threshold associated with a healthy labor market, for 73 consecutive weeks, the longest stretch since 1973.
The yen surged early Friday, meeting traders’ expectations for heightened volatility with the Bank of Japan due to hand down its most anticipated monetary policy decision since Haruhiko Kuroda’s first as governor in April 2013.
Japan’s currency rose as much as 1.8 percent to 103.41 per dollar before trading 0.5 percent stronger at104.77 as of 8:40 a.m. in Tokyo. Algorithmic platforms are being partly blamed for the moves, according to traders who declined to be identified because they aren’t authorized to speak publicly. Overnight implied volatility for the dollar-yen -- the world’s second-most traded currency pair -- climbed 40 percentage points on Thursday to 52.8 percent, the highest level since 2008.
“There was no visible news, but markets are nervous ahead of the BOJ meeting.” said Yuji Saito, Tokyo-based head of the foreign-exchange department at Credit Agricole SA.
The policy decision by the Bank of Japan Friday is turning into one of the most closely watched economic events of the year in Japan, with Governor Haruhiko Kuroda facing intense expectations to deliver more monetary stimulus.
In fact, Kuroda and the BOJ board hasn’t faced such pressure to act since his first meeting as governor in2013. Thirty-two of 41 analysts in a Bloomberg survey forecast that the board will expand its record stimulus program at the meeting that ends Friday -- the highest percentage of respondents in the poll in more than three years.
Any decision is almost certain to move the markets, with the big question being whether Kuroda will opt for more stimulus or disappoint, as he has in the past, at least in the view of some forecasters. If he does step on the easing pedal, the next question is whether he uses the current three monetary tools, or springs some unanticipated new tactic.
No action would be the biggest surprise, particularly after government officials made clear they would like central bank cooperation with their coming fiscal stimulus, and such an announcement would disappoint markets.
The most-favored easing option is expanding purchases of exchange traded-funds, with the next most mentioned a deeper cut in the negative interest rate applied to a portion of the money that commercial banks park at the BOJ, the Bloomberg survey showed.
The spectrum of forecasts includes a boost to government bond buying to as much as 100 trillion yen a year -- up from 80 trillion, quadrupling exchange-traded fund buying and cutting the policy interest rate to -0.3 percent. A more radical option: a pledge to maintain the BOJ’s balance sheet in its forward guidance.
Economists see rising optimism from the Federal Open Market Committee, which could lead to the first interest rate increase of 2016. Wall Street banks began the year thinking (or, hoping) that the Fed would raise rates repeatedly this year, only to see those hopes dashed after June's Brexit vote and a weak U.S. jobs number in May.
"These changes were modest but in an optimistic direction, and the improved risk assessment could begin to lay the groundwork for a hike in a few meetings' time, provided the data cooperate," wrote JPMorgan economist Michael Feroli on Wednesday. "We continue to look for a second rate hike in December, and we still believe we'd need to see some blockbuster employment and inflation data to make September a realistic possibility."
Goldman Sachs believes there's only a 30 percent chance of a September hike, but a 70 chance the Fed will hike before year-end.
"The FOMC is acknowledging the post-Brexit calm in the markets, but is still cognizant about the uncertainties in the global economic outlook," Bank of America Merrill Lynch economists wrote Wednesday. "We continue to believe that a September hike is unlikely, but expect conditions to be met by December to justify a rate hike, assuming no additional shocks."
Long-term inflation expectations among the British public fell to a record low this month, even though they anticipate higher inflation over the next year, according to a monthly survey published on Thursday.
Inflation expectations over the next five to 10 years fell to 2.4 percent, the lowest since the Citi/YouGov survey began in November 2005.
For the next 12 months, inflation expectations jumped to 1.8 percent compared with 1.5 percent in June, the highest level since November 2014.
Oil prices settled down nearly 2 percent on Thursday, hitting April lows and with U.S. crude headed for its biggest monthly loss in a year, on growing worries that the world was pumping more crude than needed.
U.S. crude's West Texas Intermediate (WTI) futures settled down 78 cents, or 1.9 percent, at $41.14 a barrel. WTI earlier fell to $41.04, its lowest since April 20. It also has lost 20 percent since hitting a 2016 high of $51.67 on June 9, technically placing it in bear market territory.
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