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Forex News: Dollar Mixed After Central Banks Leave Rates Unchanged

Dollar Mixed After Central Banks Leave Rates Unchanged

07/20/2017 - 13:29:00 (RTTNews)

(RTTNews) - The dollar is turning in a mixed performance against its major rivals Thursday afternoon. The buck is down against the Euro and the Japanese Yen, but is holding onto gains against the British pound. Central banks were in focus Thursday, as the European Central Bank and the Bank of Japan both maintained their respective interest rates.

A report released by the Labor Department on Thursday showed a much bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended July 15th. The report said initial jobless claims fell to 233,000, a decrease of 15,000 from the previous week's revised level of 248,000.

Economists had expected jobless claims to edge down to 245,000 from the 247,000 originally reported for the previous week.

Philadelphia-area manufacturing activity grew at a notably slower rate in the month of July, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday. The Philly Fed said its index for current manufacturing activity in the region slumped to 19.5 in July from 27.6 in June.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to show a much more modest drop to 24.0.

Pointing to continued growth in the U.S. economy, the Conference Board released a report on Thursday showing a bigger than expected increase by its index of leading economic indicators. The Conference Board said its leading economic index climbed by 0.6 percent in June after rising by a revised 0.2 percent in May.

Economists had expected the index to rise by 0.4 percent compared to the 0.3 percent increase originally reported for the previous month.

The ECB left its key interest rates and massive stimulus unchanged for an eleventh straight session, and also kept the forward guidance intact, thus retaining the downward bias on asset purchases.

The Governing Council, led by ECB President Mario Draghi, kept all its three interest rates unchanged during the policy session in Frankfurt.

The main refi rate was held at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate was kept at 0.25 percent.

The bank also retained its asset purchases of EUR 60 billion a month till December 2017, or beyond, if necessary. The size was reduced in March from EUR 80 billion.

"The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases," the bank said in a statement.

Though the robust economic expansion provides confidence that euro area inflation will hit the target in future, it is yet to show any convincing trend of a pickup, prompting policymakers to delay a review of the massive stimulus until the fall, European Central Bank President Mario Draghi said Thursday.

"Headline inflation is dampened by the weakness in energy prices," Draghi said in his introductory statement to the post-decision press conference. "Moreover, measures of underlying inflation remain overall at subdued levels."

"Therefore, a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term," he added. The dollar sank to a 23-month low of $1.1657 against the Euro Thursday, but has since rebounded to around $1.1625.

Eurozone consumer sentiment unexpectedly deteriorated in July, preliminary data from the European Commission showed Thursday. The flash consumer confidence index for the euro area fell to -1.7 from -1.3 in June, which was the highest since April 2001. Economists had forecast a score of -1.2 for July.

The euro area current account surplus increased in May largely driven by trade surplus and primary income, data from the European Central Bank showed Thursday. The current account surplus increased to EUR 30.1 billion in May from 23.5 billion in April.

Eurozone government debt to gross domestic product increased slightly in the first quarter, Eurostat reported Thursday. Government debt to GDP in euro area came in at 89.5 in the first quarter versus 89.2 percent in the previous quarter.

Germany's producer price inflation eased to a five-month low in June, data from Destatis showed Thursday.

Producer prices climbed 2.4 percent year-on-year in June, following a 2.8 percent rise in May. A similar slower pace was last seen in January.

Nonetheless, the pace of increase was slightly faster than the expected 2.3 percent.

The buck climbed to a high of $1.2929 against the pound sterling Thursday, but has since eased back to around $1.2975.

UK retail sales recovered at a faster than expected pace in June, data from the Office for National Statistics revealed Thursday. Retail sales grew 0.6 percent month-on-month in June, reversing a 1.1 percent fall in May. Sales were forecast to gain 0.4 percent.

The Bank of Japan left its massive monetary stimulus unchanged on Thursday and pushed back the timeframe to achieve its 2 percent inflation target. Governor Haruhiko Kuroda and his board members decided by an 7-2 majority vote to hold its target of raising the amount of outstanding JGB holdings at an annual pace of about JPY 80 trillion.

In the fiscal 2019, inflation is forecast to be 2.3 percent instead 2.4 percent.

The timing for annual inflation to reach around 2 percent will likely be around fiscal 2019, the bank said.

The greenback slipped to a low of Y111.466 against the Japanese Yen Thursday, but has since bounced back to around Y111.800.

Japan's all industry activity declined at a faster-than-expected pace in May, after rebounding in the prior month, data published by the Ministry of Economy, Trade and Industry showed Thursday. The all industry activity fell a seasonally adjusted 0.9 percent month-over-month in May, reversing a 2.3 percent rise in April. That was just above the 0.8 percent drop economists had expected.

Japan had a merchandise trade surplus of 439.907 billion yen in June, the Ministry of Finance said on Thursday. That was shy of expectations for a surplus of 488.0 billion yen following the 204.2 billion yen deficit in May.

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