The US dollar declined after three consecutive days of gains, as traders reinitiated selling on disappointing US economic data. Worse-than-forecast Jobless Claims results and a sharp drop in domestic Factory Orders worsened economic sentiment, sending Treasury bond yields and the domestic currency lower through subsequent trade.

The euro rallied for the first day in four, adding 45 points to $1.4134 following an uneventful European Central Bank interest rate decision and disappointments in US economic data. A similarly unexciting Bank of England rate announcement left the British Pound bid through morning trade; traders sent the Sterling $0.0080 higher to $2.0400 as the central bank left rates unchanged. Speculation that the monetary policy authority would cut interest rates had previously left the currency lower, but the BoE’s inaction gave hope that rates would remain stable through coming announcements. The recently downtrodden Japanese Yen likewise saw relief against the greenback, with the dollar shedding ¥0.24 to ¥116.50.

An unexpected rise in Initial Jobless Claims heightened fears of disappointments in US labor market growth, with the critical Nonfarm Payrolls report looming on Friday morning at 12:30 GMT. The weekly unemployment insurance metric rose to 317,000 new claims in the week ending September 29—a sharp 16k jump from the previous result. Highly publicized layoffs in the financial industry and elsewhere are clearly taking their toll on the measure, and economists predict that the situation may deteriorate further before worthwhile improvements. Such a trend in layoffs makes it increasingly important that upcoming Payrolls data show strong job creation rates through the period, but consensus forecasts of a 100k gain hardly paint a rosy picture for the future of labor growth.

A later report showed that US Factory orders fell by the largest margin since January, as a sizeable percent drop in Capital Goods orders left the headline number significantly lower. Such tumbles were largely due to sagging aircraft demand, with the Transportation index down a substantial 11.1 percent through the period. Excluding aircraft, non-defense Capital goods fell a much more moderate 0.5 percent on the month. This report is entirely consistent with previous Durable Goods orders data, and reflects softened demand for fixed capital investment in the broader US economy. Traders nonetheless took the opportunity to reinitiate US dollar short positions on the release, with increased economic uncertainty driving further greenback losses.

Domestic stock markets proved largely resilient to the morning economic data, with the Dow Jones Industrial Average unchanged through time of writing. Price action remains muted ahead of tomorrow’s critical US Nonfarm Payrolls data; the report promises to force large movements across financial asset classes. The S&P 500 Index was similarly unchanged at 1,541, while the NASDAQ Composite remained stable at 2,730.

US Treasury Yields took a much less sanguine view of the data, falling across the spectrum on increased uncertainty. The 2-Year Treasury Note shed 3 basis points to the psychologically significant 4.00 percent mark, while the 10-Year dropped 4bp to 4.52 percent.

David Rodriguez is a Currency Analyst at FXCM.