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Market Update

Jobless claims tick to 2021 highs as June FOMC meeting looms

June 12, 2023


In the shadow of this week’s key CPI print and FOMC decision, U.S. jobless claims data bucked a months-long trend by steadily rising over multiple weeks. The U.S. dollar fell on the news and bellwether commodities weakened amid global demand concerns and recessionary fears across key markets.

U.S. jobless claims jump for third consecutive week, reach October 2021 levels

Jobless claims in the United States increased for the third consecutive week last week, as the number of Americans filing for unemployment topped 261,000 for the first time since October 2021. The reversal bucks a months-long trend of a stubbornly resilient domestic labor market, which is a sobering sign to market participants that the U.S. economy may be finally showing signs of stress from a prolonged high-rate environment.

Notably, the shift in the narrative comes at a key time for Federal Reserve officials who convene this week for their June meeting to determine whether to continue their war on inflation by continuing to hike the Fed funds rate, or rather pause and assess the lag effects on the U.S. economy that may finally be revealing themselves.

The U.S. dollar weakened on the news, as sterling and the euro ended the week trading at $1.25 and $1.08, respectively.

10Y yields hover at 3.75% as investors bet Fed will pause rate hikes

After briefly topping 3.8% last week, the U.S. 10-year Treasury note retreated to 3.75% following the release of last week’s jobless claims data. Markets shifted their expectations accordingly on the Fed’s next move as investors have assigned a 72% probability that the FOMC will pause and assess the effects on the American economy. Markets also adjusted their expectations of a 25bps July hike to 50%.

Oil falls on waning China demand, natural gas buoyed by expectations of hot summer

WTI crude futures fell to $69/bbl Monday morning as weakening demand in China and increasing supply from Russia recalibrated markets.

U.S. natural gas futures also fell 1% late last week following the EIA report of a larger-than-expected storage build across the nation as mild temperatures kept demand subdued. The decline was moderated, though, by increasing demand for air conditioning usage as warm weather begins to settle in across the country.

Markets brace for big week ahead with release of key CPI data and FOMC decision

All eyes look ahead to Tuesday and Wednesday, with major economic data points and Fed decisions poised to impact markets and give investors clues as to the overall health of the U.S. economy, the FOMC’s next rates move, and how global corporates will navigate the weeks and months ahead.

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