The dollar fell versus its rivals on Thursday ahead of July US nonfarm employment data to be released on Friday. US initial jobless claims unexpectedly climbed to the highest level since April, adding to concern about slowing US economic growth. The S&P 500 declined 1.43 to 1,125.81. The yen approached a 15-year high against the dollar, supported by increasing risk aversion and narrowing yield spreads. The EUR/USD rose.
The European Central Bank maintained its benchmark interest rate at 1.00%, as forecast. ECB President Jean-Claude Trichet said inflationary expectations remain firmly anchored and the key rate remains appropriate, asserting that the available data for the third quarter are better than expected and the market is functioning a little bit better. The Australian and Canadian dollars were up modestly.
The GBP/USD was little changed today. The Bank of England maintained its key rate at 0.50% and kept the asset purchase target at £200, as expected. The pair, having risen in a well-defined trading channel since June, broke the upper trading band on Monday; thus, signaling a trend reversal. The GBP/USD is also overbought so further consolidation is imminent. Resistance is in the 1.60 area and support in the 1.57 area.
Financial and Economic News and Comments
US & Canada
US initial jobless claims in the week ending July 31 unexpectedly rose 19,000 to 479,000, the highest level since April, from the previous week's upwardly revised 460,000, figures from the Labor Department showed. The 4-week moving average increased 5,250 to 458,500. Continuing claims in the week ending July 24 fell 34,000 to 4,537,000 from the preceding week's upwardly revised 4,571,000. The 4-week moving average of those continuing claims rose 25,750 to 4,575,500. The insured unemployment rate for the week ending July 24 was unchanged at 3.6%.
US comparable chain store sales increased 2.8% y/y in July after a 3.0% y/y gain in June, the International Council of Shopping Centers said, expecting sales to rise 3.0% y/y in August.
Canada's seasonally adjusted building permits increased a more-than-anticipated 6.5% m/m to C$6.6 billion ($6.5 billion) in June, the third gain in four months, after a revised 8.2% m/m decrease in May, according to data from Statistics Canada. June building permits rose 24.9% y/y, a ninth straight year-on-year rise. The June month-on-month increase was led by a 23.5% m/m gain in non-residential permits to C$3.0 billion. Residential permits, however, declined 4.5% m/m to C$3.6 billion.
Germany's seasonally adjusted manufacturing orders grew a more-than-expected 3.2% m/m in June, the fifth gain in six months, after a revised 0.1% m/m decline in May, data from the Federal Ministry of Economics and Technology showed. Manufacturing orders climbed 28.4% y/y nsa, an eighth consecutive year-on-year gain, following May's upwardly revised 25.1% y/y advance.
New Zealand's seasonally adjusted unemployment rate rose to a higher-than-expected 6.8% in Q2 2010 from 6.0% in Q1, according to data from Statistics New Zealand. Employment declined 0.3% q/q in Q2 following a 1.0% q/q Q1 increase, but gained 1.0% y/y. The participation rate was unchanged at 68.0%.
FX Strategy Update
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