US Dollar Bounces Back To Nearly Flat After ECB Holds Firm
New York (Apr 21) The dollar weakened against both the Euro and the British pound Thursday morning, but quickly reversed back to nearly flat against the pair following today's highly anticipated announcement from the European Central Bank .
Euro zone interest rates will likely remain at "present or lower levels for an extended time," European Central Bank President Mario Draghi said Thursday.
Earlier today, the ECB held steady on rates and said it will begin to implement the planned expansion of its asset purchasing program.
ECB policy makers are desperate to return inflation back to their mandated target of 2%. Draghi expects inflation to pick up in the second half of 2016 and further recover over the next two years, but not before dropping back into negative territory in the coming months.
Therefore, the bank will begin buying corporate bonds in June, while rates will stay low "beyond the horizon of the asset purchase programme," Draghi said at his press conference.
Aggressive easing measures do not include so-called "helicopter money," which Draghi said was not even discussed at this week's meeting.
The dollar sank to an early low of USD1.1397 against the Euro Thursday, but has since rebounded to around USD1.1290 .
The government deficit and debt of the euro area decreased in 2015 as compared to last year, data from Eurostat showed Thursday. The government deficit to GDP ratio fell to 2.1% in 2015 from 2.6% in 2014. Similarly, the government debt to GDP ratio dropped to 90.7 from 92.0% a year earlier.
French business sentiment improved to a seven-month high in April, survey data from the statistical office Insee showed Thursday.
The business climate index in industry rose to 104 in April from revised 102 in March. This was the highest score since September. Economists had forecast the reading to remain at March's originally estimated value of 101.
The buck dropped to a 3-week low of USD1.4439 against the pound sterling Thursday, but has since bounced back to around USD1.4320 .
UK retail sales declined more than expected in March, figures from the Office for National Statistics showed Thursday. Month-on-month, retail sales volume slid 1.3%, bigger than February's 0.5% fall and the expected 0.1% drop. This was the second consecutive fall in sales.
The British budget deficit narrowed in March from last year, the Office for National Statistics showed Thursday. Public sector net borrowing excluding public sector banks decreased by GBP 2.6 billion from last year to GBP 4.8 billion in March. It was smaller than the expected shortfall of GBP 5.4 billion .
The greenback has retreated to around Y109.515 against the Japanese Yen Thursday afternoon, from yesterday's high of Y109.890 .
First-time claims for US unemployment benefits unexpectedly decreased in the week ended April 16th , according to a report released by the Labor Department on Thursday, with claims falling to their lowest level in over forty years.
The Labor Department said initial jobless claims edged down to 247,000, a decrease of 6,000 from the previous week's unrevised level of 253,000. Economists had expected claims to rise to 265,000. With the unexpected decrease, jobless claims fell to their lowest level since hitting 233,000 in November of 1973.
After reporting an unexpected expansion in regional manufacturing activity in the previous month, the Philadelphia Federal Reserve released a report on Thursday showing that activity unexpectedly pulled back into contraction in the month of April.
The Philly Fed said its diffusion index for current activity fell to a negative 1.6 in April from a positive 12.4 in March. Economists had expected the index to show a more modest decrease to a positive 9.0, which would have still indicated growth.
With rebounding stock prices partly offset by a decline in housing permits, the Conference Board released a report on Thursday showing a smaller than expected increase by its index of leading US economic indicators in March.
The Conference Board said its leading economic index rose by 0.2% in March after edging down by a revised 0.1% in February. Economists had expected the index to climb by 0.5% compared to the 0.1% uptick originally reported for the previous month.
Source:AllianceNews
