The US dollar (USD) gained on Thursday after Netanyahu’s response to Hamas’ offer for ceasefire and the release of better-than-expected US data. The US Dollar Index (DXY) that tracks the strength of the dollar against a basket of currencies rose slightly, as the USD is also likely to have got a lift ahead of Friday’s annual US CPI revisions.
Israel and Hamas ceasefire proposal
The prospect of a ceasefire between Israel and Hamas and the return of hostages held in the Gaza Strip, pushed the safe-haven US dollar lower. However, the dollar strengthened after Israel’s Prime Minister Benjamin Netanyahu released a statement late Wednesday evening rejecting Hamas’ latest offer for a ceasefire. In a press conference, Netanyahu called Hamas’ proposal “delusional,” and promised to destroy the Islamist movement. US Secretary of State Antony Blinken remained hopeful that the two sides could reach an agreement. “There are clearly nonstarters in what (Hamas has) put forward” but “we also see space in what came back to pursue negotiations, to see if we can get to an agreement. That’s what we intend to do.”
The Palestinian militant group Hamas proposed a ceasefire of 4-1/2 months, so that hostages could be released, Israel would withdraw its troops from Gaza and an agreement would be reached to end the war. The proposal was a response to an earlier one drawn by the US and Israeli spy chiefs.
Israel had previously said it would not pull its troops out of Gaza or end the war until Hamas was completely destroyed. According to Reuters, Hamas is taking a new, three-phase approach to end the war, as something that can be resolved in the future, instead of a condition for the ceasefire.
Washington wants to resolve the Middle East conflict and help the two sides reach a reconciliation which will ultimately lead to the creation of a Palestinian state. On the other hand, Netanyahu rejects the prospect of a Palestinian state.
Last week, Israel said it plans to storm Rafah, a move that Bob Kitchen, vice president of emergencies at the International Rescue Committee, said would “end the humanitarian lifeline from Egypt.” “If they aren’t killed in the fighting, Palestinian children, women and men will be at risk of dying by starvation or disease” he explained.
US data supports the dollar
The gloomy geopolitical landscape was not the only factor that supported the safe-haven dollar. The release of better-than-expected Initial Jobless Claims also helped to support the greenback. There was an increase in the number of citizens who applied for unemployment insurance benefits by 218K in the week ending 3 February. The report beat consensus and followed a 227K gain in the previous week. It also revealed that the advance seasonally adjusted insured unemployment rate was 1.2% (from 1.3%) and the 4-week moving average stood at 212.25, a decline of 3.750K from the previous week’s revised average. Continuing Claims dropped by 23K to 1.894M in the week ended 27 January. Following the publication of weekly labour market data, the US dollar remained supported and was flirting with yearly highs.