US Dollar Surging Against Euro After Draghi's Stimulus Comments

Washington (Oct 23)  The dollar is up sharply against the Euro, and is also rising against both the pound sterling and Japanese Yen, after  European Central Bank  President  Mario Draghi's  press conference. Draghi suggested that further stimulus measures could be coming in the near future. Economic data from the US was also largely positive this morning.

While the  Labor Department  released a report on Thursday showing a modest increase in initial jobless claims in the week ended  October 17th  , the uptick was smaller than economists had expected. The report said initial jobless claims edged up to 259,000, an increase of 3,000 from the previous week's revised level of 256,000.

Economists had expected jobless claims to climb to 265,000 from the 255,000 originally reported for the previous week.

After reporting a steep drop in US existing home sales in the previous month, the  National Association of Realtors  released a report on Thursday showing that existing home sales rebounded by much more than expected in September.

NAR said existing home sales jumped 4.7% to an annual rate of 5.55 million in September from a slightly downwardly revised 5.30 million in August. Economists had expected existing home sales to climb to a rate of 5.35 million from the 5.31 million originally reported for the previous month.

Partly reflecting recent weakness in stock markets, the manufacturing sector and housing permits, the Conference Board released a report on Thursday showing a modest drop by its index of leading US economic indicators.

 The Conference Board  said its leading economic index edged down by 0.2% in September after coming in unchanged in August and July. Economists had been expecting another unchanged reading.

The  European Central Bank  left its key interest rates unchanged at a record low on Thursday for a tenth policy session in a row.  The Governing Council  held the refinancing rate at 0.05%, following the meeting in  Malta  . The decision was in line with economists' expectations.

The bank also kept the deposit rate unchanged at -0.20% and the marginal lending rate at 0.30%. Previously, the three main interest rates were lowered by 10 basis points in  September 2014  .

ECB President  Mario Draghi  has set the stage for a possible stimulus expansion in December as policymakers are increasingly concerned over the deteriorating growth and inflation outlook for the euro area.

ECB policymakers held a very "rich discussion" regarding the various monetary policy tools that included interest rate cuts, Draghi said on Thursday, while responding to questions from reporters during his customary press conference following the rate-setting session in  Malta  .

"The strength and persistence of the factors that are currently slowing the return of inflation to levels below, but close to, 2% in the medium term require thorough analysis," Draghi said in his introductory statement to the press conference.

"In this context, the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new  Eurosystem  staff macroeconomic projections will be available."

More significantly, Draghi said the current stance of the  Governing Council  was not "wait-and-see", but more "work-and-assess". He also said that some policymakers wanted stimulus action on Thursday, but added that it was not the general sentiment in the rate-setting body.

The dollar hovered around the  USD1.1340  level against the Euro this morning, but has since broken out to a 1-month high of  USD1.1120  .

Eurozone consumer confidence weakened for a second straight month to its lowest level in nine months in October, preliminary estimates from the  European Commission  showed Thursday. The flash consumer confidence index fell to -7.7 from -7.1 in September. Economists had expected a -7.4 score.

French manufacturing confidence dropped in October, in line with expectations, figures from the statistical office Insee showed Thursday. The manufacturing confidence index fell to 103.0 in October from 104.0 in September. The figure was also matched with consensus estimate. However, the index remained above its long-term average of 100.0.

The buck has risen to a 1-week high of  USD1.5390  against the pound sterling, from an early low of  USD1.5506  .

 UK  retail sales climbed at a faster-than-expected pace in September, the  Office for National Statistics  showed Thursday. Retail sales including automotive fuel grew 1.9% month-over-month in September, exceeding economists' expectations for a 0.4% rise.

The greenback began Wednesday's session around  Y119.700  against the Japanese Yen, but has since climbed to a 1-month high of  Y120.660  .

Source: AllianceNews