The US Central Bank has reduced its monthly program of asset buying by $10 billion, staying on the way to its full October completion. The US Labor Department said earlier that the initial jobless claims in the United States fell by 36,000 to 280,000 last week, the lowest level since mid-July. The euro/dollar fell at the end of the week despite the fact that the pair had recovered after the fall to 1.2834 against this background the pair was able to get back above the resistance level of 1.2880 and rise to 1.2928. The euro fell after the news where the ECB stated that under the target long-term loans program (TLTRO) 255 applicants allocated 82.6 billion euro. The loan volumes were significantly lower than the expected 100-150 billion euro. The use of low volume loans suggests that the program will have a limited impact on the liquidity improvement in the euro area.
The US Department of Labor reported that the initial jobless claims increased by 11,000 to a 10-week high of 315,000 from the previous revised 304,000 weeks. Analysts expected the claims numbers would decline by 4,000 to 300,000 last week. Expectations that the Federal Reserve is close to increase the interest rates, contributed to the dollar growth. The study conducted by the San Francisco Federal Reserve Bank and published on Monday showed that the central bank officials predict the growth rates earlier than the market expects.
The demand for the dollar is still supported by the expectations that the Federal Reserve is on the way to raise interest rates, as the recent optimistic economic reports showed the United States recovery increase. The EUR/USD showed the active decline and then a slight correction. The moving average is directed horizontally, but may decrease further. The key resistance levels are represented by the 1.2956 and 1.2972 marks. The key support level is located at the level of 1.2920. The euro is traded near 14-month low against the dollar after the last European Central Bank policy decision continues pressure the euro. The ECB cut its benchmark interest rate to the record low of 0.05% from 0.15% surprising many market analysts who didn’t expect any changes.
The dollar strengthened after the preliminary data showed that the United States GDP increased by 4.2% in the second quarter, exceeding the growth expectations by 3.9%, after the expanding by 4.0% during three months till April. In addition, the United States Labor Department reported that the initial claims fell by 1,000 to 298,000 from a revised 299,000 the previous week. The EUR/USD is traded at 1.3175, with 0.05% decrease. The pair has found the support at the level of 1.3130 – lower then the Wednesday min. The new resistance is the level of 1.3170. The Germany inflation stopped at a very low level, while the Spain consumer prices have fallen. The preliminary data showed that the Spain consumer price inflation fell at an annualized rate of 0.5% in August compared to the decline expectations of 0.2% after the 0.3% fall in July.
The dollar rose after the Fed's July meeting report was published on Wednesday having shown that some officials believe that a recovering economy and a continuous labor market improvement supported the move toward a tighter monetary policy. The EUR/USD reached 1.3294, its highest level since Wednesday, and subsequently consolidated at 1.3295, adding 0.12%.
The dollar weakened when the United States Labor Department reported that the Initial Jobless Claims at August 9 increased by 21,000 to 311,000 from a revised 290,000 from the previous week. The euro held near the nine months lows against the dollar, being affected by the weak Germany and France statistics that doubted the euro recovery and strengthened the further European Central Bank stimulus expectation. Weaker-than-expected data added some concerns that the euro zone economic recovery is losing strength, increasing pressure on the European Central Bank to take measures to support the economic growth after the rates were dropped to the record low levels in June.
The President Barack Obama authorized limited air strikes to suppress Islamic militants in northern Iraq which led to commodity and EM currencies drop in stock markets, but to the first-rate government bonds increase, as well as the oil price jump. As many expected, the ECB announced that it leaves its main refinancing rate at 0.15%. In June, the bank cut rates to a record low rate for the first time and lowered the rate on deposits to a negative value, in an attempt to prevent the growing deflationary pressure in the region. The recent data showed that the annual inflation rate in the euro area slowed in July to 0.4% from 0.5% in June, adding pressure on the bank. The concerns over the economic sanctions impact against Russia also undermined investor sentiment.
The euro fell slightly against the other major currencies amid the data that had shown that July euro area consumer price inflation had slowed down even more. The annual inflation rate was 0.4% which indicates the ECB monetary policy further easing possibility.The pound fell to a fresh half month low against the dollar since optimistic U.S. economic growth data that continues to support the dollar demand, but the next Fed policy statement limits the growth. It is difficult to determine the USD/JPY growth reason amid the American stock market collapse. Against this backdrop the Japanese stock market fell seriously only on Friday (Nikkei225 -0,33%) and also the yen was supported by the American government bond yield growth (weekly 10-year-old from 2.44% to 2.57%).