Market Review - 11/01/2018 23:35GMT
Dollar tumbles broadly on rally in euro after hawkish ECB minutes
The greenback fell broadly on Thursday against its major counterparts ahead of New York open due to intra-day jump in the currency after release of hawkish ECB minutes which said it should gradually shift in policy guidance from early 2018 together with soft U.S. PPI data.
Minutes of the European Central Bank's last monetary policy meeting showed the central bank should revisit its communication stance in early 2018 and gradually adjust its language to reflect improved growth prospects, the accounts of the bank's December policy meeting showed on Thursday.
A change in the ECB's policy message would likely be taken by investors as a sign that rate-setters are getting ready to wind down their 2.55 trillion euros bond-buying programme, the key plank of their stimulus policy for the past three years.
The U.S. Labor Department said that the producer price index fell 0.1% last month. In the 12 months through December, the PPI rose 2.6%. Economist had expected the PPI to increase by 0.2% last month and by 3.0% from a year earlier. Core PPI, a gauge of underlying producer price pressures that excludes food and energy costs also fell by 0.1% last month and rose by 2.3% on a year-over-year basis. Economists had forecast the core PPI increasing by 0.2% last month and by 2.5% from a year earlier.
Euro initially rebounded from Wednesday's New York low at 1.1941 to 1.1970 in Asia before retreating in tandem with cable to session lows at 1.1930 at European morning. However, the single currency swiftly jumped on hawkish ECB minutes and later climbed above Monday's high at 1.2052 to 1.2059 after release of lower-than-expected U.S. PPI data, price later moved narrowly in subdued New York afternoon.
Versus the Japanese yen, although dollar traded above Wednesday's low at 111.27 in Asia and rebounded to 111.88 at European open on short covering, pair met renewed selling and price fell to a fresh 6-week low of 111.05 in New York afternoon on broad-based usd's weakness before inching higher at the close.
Although the British pound remained under pressure in Asia and tumbled to a 9-day low at 1.3458 ahead of New York open, price erased intra-day losses and rallied to session highs at 1.3555 in tandem with intra-day rally in euro.
In other news, Reuters reported there is no end in sight to Germany's economic boom and the next government should lower taxes gradually starting next year when the European Central Bank is expected to unwind its monetary stimulus, the Ifo institute's chief economist said on Thursday.
On the data front, in a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 6 increased by 11,000 to a seasonally adjusted 261,000 from the previous week's total of 250,000. Analysts had expected jobless claims to drop to 246,000 last week.
Data to be released on Friday:
New Zealand building permits, Japan current account, economy watchers poll, trade balance, China retail sales, industrial output, exports, imports, trade balance, Italy industrial output, trade balance, U.S. CPI, core CPI, retail sales, retail sales ex-autos, business inventories, federal budget
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