The greenback fell broadly against major currencies after the release of higher-than-expected jobless claims and weak GDP data. A cooling labor market and slowing economic growth added speculation that the Federal Reserve will cut interest rates through June.
U.S. initial jobless claims rose 19,000 to 373,000 (forecast was 350,000) in the week to Feb. 23 from the upwardly revised 354,000 jobs in the previous week. The U.S. economy grew at an annual rate of 0.6% last quarter of 2007.
Fed Chairman Ben S. Bernanke said it was ‘fair’ to say it was tougher for the bank to respond now than to the recession of 2001 and indicated the bank ‘will act in a timely manner’ to insure against ‘downside risks’ to the economy. He also said weaker dollar could help narrowing trade gap and which is a positive development. However, President George W. Bush said his administration supports a ‘strong dollar’, and the currency's value will be reflected by markets as the economy grows. Interest-rate futures showed a majority of traders expect the Fed to cut rates to at least 2% by mid-year, from 3% now.
European Central Bank President Jean-Claude Trichet today said ‘price stability is a necessary condition’ for ongoing economic expansion and employment. German Finance Minister Peer Steinbrueck said he saw a risk of recession in the United States but not in Germany. Steinbrueck said data on Germany's economic fundamentals were stable and 'do not point to a severe economic slowdown and not at all to a recession. The single currency rallied to a fresh record high of 1.5231 against the dollar. The greenback tumbled versus the Swiss franc to a record low of 1.0485. The British pound rebounded from 1.9763 to 1.9948 due to dollar’s broad-based weakness.
Friday will see the release of Japan’s manufacturing PMI, Tokyo CPI, unemployment rate, housing starts and construction orders, U.K. Nationwide house price, German CPI, HICP and retail sales, eurozone HICP, unemployment, business climate and economy sentiment, U.S. core PCE, Chicago PMI and University of Michigan survey.