The single currency tumbles on Thursday on ECB's Draghi dovish remarks: Oct 23, 2015

Market Review – 22/10/2015 22:53 All times in GMT 
 
The single currency tumbles on Thursday on ECB’s Draghi dovish remarks

The euro fell against other major currencies on Thursday, after European Central Bank President Mario Draghi said that the central bank would reexamine its monetary stimulus program at its policy meeting in December, hinting the possibility for further easing measures before the end of the year.

On Thursday, the European Central Bank announced to maintaining its benchmark interest rate at a record-low 0.05%, with interest rate on deposit facility unchanged at -0.20%, interest rate on marginal lending unchanged at 0.30% and interest rate on deposit facility unchanged at -0.20%.

In ECB’s post-rate decision Press Conference, Mr. Draghi added that the ECB’s quantitative easing program is set to run until 2016 or beyond if necessary. He also said that downside risks have emerged for growth and the inflation outlook in the euro area.

During the day, the single currency came under renewed selling pressure against the greenback at 1.1351 in Asia and then tanked to 1.1303 in European morning. Later, intra-day decline accelerated and nose-dived to 1.1155 on remarks from ECB’s President Mario Draghi at ECB’s press conference and the release of upbeat U.S. weekly jobless claims, then further lower to 1.1100 before stabilizing.

Versus the Japanese yen, although U.S. dollar ratcheted lower in Asia and hit a session low of 119.62, renewed buying emerged and contained intra-day losses there. Later, broad-based gain in the greenback led by intra-day selloff in eur/usd pushed price higher to 120.77 in New York afternoon.

On the data front, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending October 17 increased by 3,000 to a seasonally adjusted 259,000 from the previous week’s total of 256,000. Market had expected jobless claims to rise by 9,000 to 265,000. Meanwhile, the National Association of Realtors said that existing home sales increased 4.7% to a seasonally adjusted 5.55 million units last month from 5.30 million in August. Analysts had expected existing home sales to rise 1.4% to 5.38 million units in September.

Separately, an indicator of U.S. economic activity declined in September. The Conference Board said Thursday its Leading Economic Index dipped 0.2 percent to 123.3 in September.

The British pound went through a roller-coaster session versus usd on Thursday as although moved sideways in Asia and then rallied to a high of 1.5510 after release of better-than-expected U.K. retail sales data which fueled optimism over the strength of the British economy. Lack of follow-through buying prompted profit-taking taking and the British pound later retreated in tandem with euro to a fresh session low of 1.5369 in New York midday before recovering.

The U.K. Office for National Statistics reported on Thursday that retail sales surged by 1.9% last month, blowing past forecasts for a gain of 0.3%. Retail sales in August fell by 0.4%, whose figure was revised from a previously reported gain of 0.2%. Year-on-year, retail sales increased by 6.5% in September, above expectations for a 4.8% gain, after rising at a rate of 3.5% in August. Core retail sales, which exclude automobile sales, jumped 1.7% last month, easily surpassing forecasts for a 0.3% increase and following a drop of 0.7% in August.

In other news, Reuters reported the risks to German industry have risen due to the economic slowdown in China and other emerging markets and uncertainty generated by the Volkswagen emissions scandal, the Finance Ministry said.

In its Oct monthly report, the ministry said on Thur that economic indicators pointed to a temporary slowdown in manufacturing and foreign trade in the 3rd quarter.

Last week, the German government slightly lowered its growth forecast to 1.7% for this year, blaming an economic slowdown in China and other emerging markets, but stuck to its prediction of a 1.8% expansion next year.

The Finance Ministry pointed to business confidence as reflecting expectations that industry would continue to grow. “The risks for German industry have, however, recently intensified due to the economic weakening in China as well as other emerging economies, and due to the not thus far assessable impact from the crisis at Volkswagen,” the ministry said.

In its report, the Finance Ministry said domestic demand, especially private consumption, is the most important driver of the moderate growth in the German economy. “Next year, increasingly positive impetus should come from the expected global economic recovery,” the ministry added.

Data to be released on Friday:

China house prices, Caixin manufacturing PMI, Makit manufacturing PMI and service PMI for France, Germany and euro zone, Italy industrial orders, retail sales, wage inflation, Canada CPI.  

The single currency tumbles on Thursday on ECB's Draghi dovish remarks: Oct 23, 2015