Euro tanks after ECB Dragi's dovish guidance, dollar rallies on the back of tumbling eur/usd
Despite gaining to near 1-month high in Europe, the single currency staged the steepest drop since June 2016 as European Central Bank planned to keep interest rates unchanged until 2019 as well as extending QE purchasing to year-end.
The ECB Governing Council intends to maintain its policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path.
The single currency went through a highly volatile session. Although euro rose steadily from 1.1790 in Asian morning and jumped briefly to a fresh near 1-month peak at 1.1852 after ECB left interest rate unchanged, price swiftly erased intra-day gains and staged the steepest one-day drop since June 2016 to a 2-week low at 1.1563 in hectic trading in New York session following ECB Draghi's dovish guidance, price last traded near the days low at the close.
Versus the Japanese yen, although dollar fell steadily to session lows of 109.92 in European morning due to falling U.S. Treasury yields, however, price erased intra-day losses and rallied to 110.50 in New York as intra-day selloff in eur/usd has triggered broad-based rally in the greenback.
The British pound also went through a roller-coaster ride. Although cable found renewed buying at 1.3371 in Asian morning and spiked up to session highs at 1.3447 in European morning on robust UK retail sales data, price erased intra-day gains and tumbled in tandem with euro on upbeat U.S. retail sales data to 1.3305 in New York morning before rebounding to 1.3350. However, renewed Brexit concerns after UK's pro-EU rebel Grieve's comments knocked price further down to session lows of 1.3258 near the close.
UK retail sales rose 1.3% in May, the Office for National Statistics said on Thursday. Economists had forecast a reading of just 0.5%. Year-on-year, retail sales rose by 3.9% last month. Analysts had penciled in a 2.4% gain. Core retail sales, which exclude automobile sales and fuel, increased by 1.3% in May, after gaining 1.4% a month earlier. April's advance was revised up from an initial increase of 1.3%. Economists had expected a 0.3% rise.
UK's pro-EU rebel lawmaker Grieve said; 'Brexit amendment on meaningful vote on final Brexit deal is unacceptable.'
In other news, Reuters reported UK's Lower House of Parliament will consider amendments to Brexit legislation on June 20.
On the data front, U.S. retail sales increased by a seasonally adjusted 0.8% last month, according to the U.S. Commerce Department, easily surpassing expectations for a gain of 0.4%.
Data to be released on Friday :
Germany wholesale price, Italy industrial order, industrial sales, CPI, CPI (EU Norm), EU trade balance, CPI, Canada manufacturing sales, and U.S. NY Fed manufacturing, industrial production, capacity utilization, manufacturing output, U. Mich. sentiment.
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