(MENAFN– ecpulse)
The euro remained weak on Thursday after retreating from a six-week high against the dollar amid speculation European Central Bank (ECB) Chief Mario Draghi will once again reassure investors that policy makers will keep interest rates low for as long as needed after a meeting today.
The European Central Bank concludes a policy meeting later today but is not expected to make any major changes to policy, backed by positive Purchasing Managers’ Index (PMI) data showing little sign of inflation pressures.
The single currency did not react significantly to a two-year high Manufacturing Purchasing Managers’ Index (PMI) data from the Eurozone. Manufacturing output for July was revised slightly higher at 50.3, hitting a new 2-year high from June`s 48.8, revised slightly higher from a preliminary reading of 50.1.
Manufacturing output rose again in Germany and Italy, however, there were signs the downturns in the euro zone`s most vulnerable economies, like Spain and France. The German PMI for manufacturing was also revised higher to a new 2-year high, up to 50.7 in the final revision from 50.3.
The ECB predicted in June that the Euro-zone will return to growth by the end of the year, a sentiment which was seemingly supported by today’s PMI.
The Euro dipped Thursday to trade around 1.32362, after opening at 1.33007, pushing the pair up to record a low of 1.32267 and a high of 1.33104.
Pound was lower early Thursday as investors awaited the central bank announcement. The Bank of England will keep its bond-purchase program at 375 billion pounds today and its key rate at a record-low 0.5 percent, according to median estimates.
Sterling reacted positively for the higher PMI’s data to continue to translate into stronger growth, following the 0.6% GDP expansion seen in the first quarter. Stronger expansion may calm worries expressed by the Bank of England last month over the rate of the recovery.
The pound is currently tradingaround 1.51907 after opening at 1.52040. The trading range for today is among key support at 1.4995 and key resistance at 1.5280.
The Australian dollar remained under pressure, as investors saw a strong probability of an interest rate cut next week following dovish comments from the head of the Reserve Bank of Australia on Tuesday. The Australian Reserve Bank Governor Glenn Stevens said inflation outlook allows for room to lower interest rates if required.
The Australian dollar declined to its lowest level in almost three years, as speculation the central bank will cut borrowing costs next week curbed demand for the currency, outweighed better-than-expected manufacturing data out of China, the nation’s biggest trading partner.
Chinese manufacturing sector unexpectedly strengthened in July where manufacturing PMI rose to 50.3 in July, to exceed analysts’ expectations of 49.8, while the previous reading recorded 50.1.
The higher-yielding Australian dollar fell to trade at 0.89801 after the pair started today’s session at 0.89771.
The U.S. dollar softened on Thursday, after slipping overnight as the Federal Reserve gave no fresh clues that it was preparing to scale back stimulus at its next meeting in September.
The FOMC opted on Wednesday to keep its benchmark interest rate unchanged at a record low between 0.0% and 0.25%, and also maintained its monthly $85 billion of bond purchases. The Fed, however, downgraded U.S. growth to `modest`, as the persistent low rate of inflation could negatively affect the U.S. economy’s expansion.
Data released in the previous session showed second-quarter advanced reading of the nation’s annualized GDP came in above the market forecasts of 1.0 percent at 1.7 percent from a prior revised reading of 1.1 percent originally reported at 1.8 percent.
A separate report showed that private-sector payrolls increased in July at the highest pace this year to 200,000. U.S. nonfarm payrolls data, due on Friday, forecast to drop to 183,000 from 195,000, while overall unemployment rate is expected to have declined by 0.1 percent to 7.5 percent from 7.6 percent.
The USDIX currently trades at 82.13 after opening at 82.48, having so far hit a high of 82.48 and a low of 81.68.
Meanwhile, the yen weakened against all its major peers after a report showed Japanese investors increased their holdings of overseas bonds for a fourth week. Japanese investors purchased 233.2 billion yen more overseas bonds and notes than they sold in the seven days ended July 26.
The USDJPY pair is currently trading at ¥98.813 while recording a high of ¥98.835 and a low of ¥97.652. The pair started today’s session at ¥97.838.
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