The dollar is losing ground against all of its major rivals Thursday afternoon, but the decline is the most pronounced against the Euro. The Euro began to strengthen after the European Central Bank decided against increasing the size of its bond purchases.
The latest round of stimulus from the ECB began with a 10 basis points cut to its deposit rate earlier on Thursday. The rate was thus taken deeper into negative territory to -0.30 percent. The size of the reduction was at the lower end of the 10-20 basis points cut economists had forecast.
The Governing Council, which met in Frankfurt, left the main refinancing rate, or the refi, unchanged at record low 0.05 percent and the marginal lending facility rate at 0.30 percent.
During his post-decision press conference, ECB President Mario Draghi announced that the bank’s EUR 1.1 trillion asset purchase programme, or APP, will be extended until March 2017, “or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2 percent over the medium term.”
The ECB left the size of the monthly asset purchases under the APP unchanged at EUR 60 billion, contrary to economists’ expectations for a boost to as much as EUR 80 billion. The APP was launched in March this year.
Meanwhile, the Federal Reserve will likely raise interest rates even before inflation hits the central banks 2 percent target, Fed Chair Janet Yellen said Thursday in testimony before the Congressional Joint Economic Committee.
“Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals,” Yellen told lawmakers on Capitol Hill.
“Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”
She said that the economic data since October is in line with the central bank’s projection of an improved job market, signaling the Fed is ready to raise rates at their December 15-16 meeting.
A day ahead of the closely watched monthly jobs report, the Labor Department released a report on Thursday showing that first-time claims for U.S. unemployment benefits rose in line with estimates in the week ended November 28th.
The report said initial jobless claims climbed to 269,000, an increase of 9,000 from the previous week’s unrevised level of 260,000. Economists had expected claims to rise to 269,000.
After reporting strong growth in the previous month, the Institute for Supply Management released a report on Thursday showing that the pace of growth in U.S. service sector activity slowed more than expected in November.
The ISM said its non-manufacturing index dropped to 55.9 in November from 59.1 in October. While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a more modest pullback to 58.2.
New orders for U.S. manufactured goods rose by slightly more than expected in the month of October, according to a report released by the Commerce Department on Thursday. The Commerce Department said factory orders jumped by 1.5 percent in October following a revised 0.8 percent decrease in September.
Economists had expected orders to climb by about 1.4 percent compared to the 1.0 percent drop originally reported for the previous month.
The dollar reached an early high of $1.0506 against the Euro Thursday, but has since dropped to a 1-month low of $1.0935.
Eurozone private sector growth accelerated at a slightly slower than initially estimated pace in November, final data from Markit showed Thursday. The final composite output index rose to 54.2 in November from 53.9 in October, to stay above the no-change mark of 50.0 for the twenty-ninth successive month. It was below the flash score of 54.4.
Eurozone retail sales dropped unexpectedly in October due to a fall in food sales, data from Eurostat revealed Thursday. Retail sales fell 0.1 percent in October from previous month, the same rate of decline as seen in September. Sales were expected to grow 0.2 percent.
The French unemployment rate increased in the third quarter, figures from the statistical office Insee showed Thursday.
The jobless rate, measured according to International Labor Organization, or ILO, standards increased to 10.6 percent from revised 10.4 percent in the second quarter. It was expected to rise to 10.4 percent from the second quarter’s originally estimated 10.3 percent.
The buck traded around the $1.4930 level against the pound sterling Thursday morning, but has since pulled back to around $1.5110.
The U.K. service sector expanded at the fastest pace in four months in November on robust new orders, suggesting that service providers are set to end 2015 on a positive note, survey results from Markit Economics showed Thursday.
The Markit/Chartered Institute of Procurement & Supply Purchasing Managers’ Index for the service sector rose more-than-expected to 55.9 in November from 54.9 in the previous month. The reading signaled the fastest pace of growth since July and the score exceeded the expected level of 55.0.
The greenback rose to a high of Y123.562 against the Japanese Yen Thursday morning, but has since fallen to around Y122.600.
The services sector in Japan continued to expand in November, albeit at a slower rate, the latest survey from Nikkei revealed on Thursday with a PMI score of 51.6. That’s down from 52.2 in October, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction.
The material has been provided by InstaForex Company – www.instaforex.com