Weak volume and mixed data was the recipe for a volatile days trading on Thursday as investors remain uncertain as to how soon the Fed will start to phase out its monetary stimulus program.
The greenback found support in the morning session after the Department of Labor announced the number of people who filed for unemployment assistance in the U.S. fell last week to the lowest level since January 2008, falling by 15,000 to 320,000.
U.S. consumer prices also rose in line with forecasts by a seasonally adjusted 0.2% in July. Core consumer prices, excluding food and energy costs, climbed 0.2%, matching forecasts.
The data reinforced the view that the U.S. economy has recovered enough for the Fed to begin scaling back the level of bonds it buys as part of its $85 billion-a-month asset purchase program, perhaps as soon as September.
However, reports later in the session clouded the picture somewhat. U.S. industrial production came in flat for July, missing expectations for a 0.3% increase. Whilst manufacturing activity in the Philadelphia-region expanded at the slowest pace in four months in August and manufacturing activity in the Empire state fell unexpectedly.
The news caused the dollar to weaken across a number of currencies.
USD/JPY ended the U.S. session down 0.71% to 97.45 after briefly touching highs of 98.64.
The yen was further supported after Japanese officials dismissed a media report that Tokyo is considering cutting the corporation tax rate.
EUR/USD gained 0.61% to 1.3339, recovering from a low of 1.3205 earlier in the session.
GBP/USD moved up 0.93% to 1.5644, close to a two-month high against the dollar.
The pound found support after official data showed that UK retail sales came in higher than expected for July, fuelling optimism over the economic recovery.
And New Zealand’s dollar strengthened after data showed manufacturing expanded at the fastest pace in nine years, job advertisements increased and a gauge of consumer confidence rose. NZD/USD closed the U.S. session up 0.6% to 80.73.
Meanwhile gold was boosted, closing up 2%, after a sell-off in U.S. equities and rising tensions in the Middle East boosted the yellow metal’s safe-haven appeal.
More Coverage of Today’s Top Story
- Marc Chandler: Takeaways from U.S. Data Dump. – News that weekly initial jobless claims fell to their lowest level in six years, with new cyclical lows in the 4-week moving average, have overwhelmed the other US data reported today. A recent Bloomberg poll found a little more than 2/3 expect the Fed to begin tapering next month. The risk is that many are putting too much emphasis some indications of improvement in the labor market, and not giving sufficient due to the broader economic context, and, just as importantly, the lack of price pressures.
- FT: Rise in UK retail sales boosts sterling. – Sterling bounced after retail sales in the UK climbed at the fastest rate in more than two years in July.
More Top Stories:
The Australian: Japan news sends Australian dollar higher. – The Australian dollar has firmed after Japan’s Economics Minister Akira Amari said Australia’s second largest trading partner was halfway out of deflation.
WSJ: Improving data boost New Zealand dollar. – The New Zealand dollar was trading higher late Thursday, bolstered by improving domestic data and a weaker U.S. dollar.
Investing.com: USD/CAD lower in volatile trade after U.S. data. – The U.S. dollar was lower against the Canadian dollar in volatile trade on Thursday following the release of a series of mixed U.S. economic data as speculation over how soon the Federal Reserve may start tapering stimulus continued.
Investing.com: EUR/USD gains as mixed U.S. data clouds timing of Fed tapering. – The euro traded higher against the dollar on Thursday as investors digested mixed economic data and concluded that the Federal Reserve will likely keep dollar-weakening stimulus programs in place possibly through the end of this year.
Investing.com: GBP/USD trims gains after U.S. data. – The pound trimmed gains against the U.S. dollar on Thursday, after the release of positive U.S. data eased expectations for a near-term end to the Federal Reserve’s stimulus program, lending support to the greenback.
Reuters: Yen edges up vs dollar as Japan officials dismiss tax cut talk. – The yen firmed against a broadly weaker dollar on Thursday after Japanese officials dismissed a media report that Tokyo is considering cuts in corporate tax.
CNBC: Gold prices settle 2% higher on Mideast tensions. – Gold rose 2 percent on Thursday to a near two-month high, as a sell-off in U.S. equities helped lift bullion above a key technical resistance at $1,350 which triggered heavy buy-stop orders. Flaring tensions in Egypt and the Middle East may have also boosted the yellow metal’s safe-haven appeal.