Dollar Climbing Following European Central Bank Announcement
21 October 2016 - 1:21AM
RTTF2
The dollar is gaining ground against all of its major rivals
Thursday afternoon, following today's highly anticipated
announcement from the European Central Bank. The decision to leave
interest rates unchanged was in line with expectations, but some
comments from ECB President Mario Draghi caused some volatility in
the markets.
The European Central Bank kept its key interest rates unchanged
for a fifth consecutive session and retained its asset purchases,
apparently setting the stage for December action as policymakers
explore how to implement any extension of stimulus.
The Governing Council, led by ECB President Mario Draghi, held
the refi rate unchanged at a record low zero percent in the policy
session held in Frankfurt.
The deposit rate was maintained at -0.40 percent, and the
marginal lending facility rate at 0.25 percent. The three rates
were previously lowered in March.
"The Governing Council continues to expect the key ECB interest
rates to remain at present or lower levels for an extended period
of time, and well past the horizon of the net asset purchases," the
bank said in a statement.
The bank also confirmed that the monthly asset purchases of EUR
80 billion are intended to run until the end of March 2017, or
beyond, if necessary, and in any case until a sustained adjustment
in the path of inflation consistent with its inflation aim is
seen.
The latest policy decision was in line with economists'
expectations.
ECB President Mario Draghi ruled out any discussion of
'tapering' among policymakers in the latest rate-setting session,
but added that it was unlikely that asset purchases would have an
abrupt end, signaling that they may be extended beyond March
2017.
"We did not discuss tapering or the intended asset purchase
horizon," Draghi said in response to questions from reporters
during the post-decision press conference in Frankfurt. There will
not be a sudden stop once the bank decided to end the programme, he
said.
That said, Draghi stressed that extraordinary monetary support
cannot be in place forever, but he found it unlikely that the
bank's asset purchases would come to an abrupt end, suggesting they
would be wound down or tapered first.
The dollar surged to nearly a 4-month high of $1.0915 against
the Euro Thursday, but has since eased back to around $1.0935.
The euro area current account surplus increased to a 3-month
high in August, the European Central Bank said Thursday. The
current account surplus rose to EUR 29.7 billion from EUR 27.7
billion in July. This was the highest since May, when the surplus
totaled EUR 33.1 billion.
Germany's producer prices declined at a faster-than-expected
pace in September, figures from Destatis showed Thursday. The
producer price index fell 1.4 percent year-over-year in September,
exceeding economists' forecast for a decrease of 1.2 percent.
However, it was slower than the 1.6 percent drop in August.
The buck rose to a high of $1.2208 against the pound sterling
Thursday morning, but has since retreated to around $1.2260.
U.K. retail sales remained unchanged for a second month in
September as higher prices and warm weather weighed on clothing
sales.
There was no change in the sales volume compared with August,
the Office for National Statistics reported Thursday. Economists
had forecast a 0.3 percent increase for September following nil
growth in August.
The greenback has advanced to around Y103.960 against the
Japanese Yen this afternoon, from an early low of Y103.390.
Initial jobless claims in the U.S. rose by more than expected in
the week ended October 15th, according to a report released by the
Labor Department on Thursday. The Labor Department said initial
jobless claims climbed to 260,000, an increase of 13,000 from the
previous week's revised level of 247,000.
Economists had expected jobless claims to inch up to 250,000
from the 246,000 originally reported for the previous month.
While the Federal Reserve Bank of Philadelphia released a report
on Thursday showing a slowdown in the pace of regional
manufacturing growth in the month of October, the pace of growth
slowed less than economists had expected.
The Philly Fed said its index for current manufacturing activity
in the region fell to 9.7 in October from 12.8 in September, but a
positive reading indicates continued growth. Economists had
expected the index to drop to 7.0.
Partly reflecting a jump in the share of sales by first-time
home buyers, the National Association of Realtors released a report
on Thursday showing that existing home sales in the U.S. rebounded
by much more than anticipated in the month of September.
NAR said existing home sales jumped by 3.2 percent to an annual
rate of 5.47 million in September after falling by 1.5 percent to a
downwardly revised rate of 5.30 million in August. Economists had
expected existing home sales to inch up by 0.4 percent to a rate of
5.35 million from the 5.33 million originally reported for the
previous month.
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