Dollar demand accelerated on Thursday after US reported strong data on the labor market. Accordingly, the Federal Reserve said they are now seriously reconsidering an early curtailment of support measures, which further renewed vigor of investors to dollar.

But before all that, euro was the one that was climbing up, thanks to the inflation data released from Italy. Although the figure was the same as forecasted, it inspired bullish traders to push EUR / USD up to new daily highs. Sadly, as soon as the report on US jobless claims was published, the market changed interest and the rate of EUR / USD dropped.

According to the report, US jobless claims fell very sharply last week, signaling reductions in layoffs, which means that business conditions have improved and companies are now seeking to increase workers. Initial applications were down 26,000 to 360,000, instead of the expected 350,000. This decline corresponds to a broader economic recovery, which will only accelerate in the second half of this year.

However, the figure is still above the pre-pandemic level and employers continue to report problems with finding skilled workers. Fed Chairman Jerome Powell said there is still a long way to go before the labor market achieves full recovery.

So, to stimulate job growth, many state authorities announced plans to end support programs earlier than scheduled. They believe that additional payments are holding back recovery, as poor people prefer to receive additional benefits and not work, rather than waste time earning less than the benefits.

St. Louis Fed President James Bullard supported this idea and said the measures are now starting to harm the economy rather than help it. He fully agrees to the early end of the programs, as well as to changing the course of monetary policy to a tighter one.

Of course, Bullard did not forget to warn that the FOMC should be prepared for excessive market volatility once it begins cutting back bond purchases. On July 27, the committee will meet to discuss the economic outlook and its plans on the bond buying program.

And if the central bank really decides to reduce bond purchases ahead of schedule, they could take control of inflation, which, until now, continues to post better-than-expected growth. Latest reports reveal that US CPI has increased by 5.4% year-on-year, largely due to transition factors.

As for other macro statistics, there was a slight slowdown in growth, especially in the industrial sector. The Federal Reserve said output rose only 0.4% in June amid persistent supply shortages.

Meanwhile, manufacturing output fell 0.1% after rising 0.9% in the previous month.

With regards to EUR / USD, a lot depends on 1.1825 because climbing above it will result in a further jump towards 1.1850, 1.1875, or even to the 19th figure. But if the quote plummets to the bottom of the 18th figure, the pair will decline to 1.1770 and 1.1740.

GBP

Initially, pound was increasing in price, thanks to the statements released by representatives of the Bank of England. But in the afternoon, it started to decline amid strong labor market data from the United States.

A sudden spike in UK inflation and record growth in jobs are beginning to convince some Bank of England members to end stimulus measures ahead of schedule. In fact, talk has already begun that changes may be adopted as early as next month.

For example, MPC members Michael Saunders and Dave Ramsden said the central bank should reduce bond purchases in the near future, which is the complete opposite of what they said and voted for last month. Both officials elected to keep the Bank of England's £ 150 billion bond purchase program.

As mentioned earlier, this led to an increase in GBP/USD, but today a lot depends on 1.3825 - 1.3800 because dropping below it will lead to a collapse towards 1.3770 and 1.3740. But if the quote goes above 1.3860, the pair will be able to climb to 1.3900.