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 .