The dollar and Japanese yen dropped against most of their major counterparts on Thursday as solid corporate earnings and a drop in continuing jobless claims boosted optimism over the U.S. labour market and increased demand for riskier assets. The number of U.S. workers filing new claims for jobless benefits rose by slightly more than expected last week to 584,000 but the four-week moving average for new claims, considered to be a better gauge of underlying trends, fell to 559,000, the lowest level since late January. All European stock markets closed up more than 1%. DJI ended up 83.74 points or 0.92% although it retreated from its intra-day high after U.S. President Barack Obama said that the second quarter GDP figures to be released on Friday would show that the economy had contracted and job losses were still a 'huge' problem.
Euro rebounded strongly against the dollar to as high as 1.4096 on Thursday from a two-week low of 1.4007 formed in the previous day as a surge in global stock markets encouraged investors to be more risk-aggressive. In addition, German unemployment unexpectedly dropped in July by 6,000 and jobless rate was steady at 8.3 percent, investors shrugged off the news as it was largely due to one-off effects, as stated by the German Labour Office. However, euro retreated briefly to 1.4014 in New York morning after International Monetary Fund issued a statement saying that 'the European Central Bank should keep eurozone interest rates low for some time by providing unlimited term funding and called for 'resolute, coordinated action to clean up the banking system'.
The British pound strengthened to as high as 1.6526 against the greenback as the Nationwide Building Society said on Thursday that British house prices rose for a third month running in July, providing further evidence that property prices may have stabilised despite a low turnover. Nationwide house prices added 1.3% this month, reducing the annual fall in prices to 6.2%, its smallest in more than a year. However, Nationwide also cautioned that the pick-up in prices may not be sustained. Cross buying in the pound versus euro also helped to lift the pair as eur/gbp weakened to 0.8503 before rebounding.
The Japanese yen weakened against higher-yielding currencies on Thursday as safe-haven demand declined. Euro, aussie and sterling rose against the yen from 133.23 to 134.90, 77.40 to 79.29 and 155.27 to 158.06 respectively. Dollar also rallied versus the yen from 94.84 to 95.89.
Oil jumped more than 5% to near $67 per barrel on Thursday and August gold futures ended up 0.83% as economic data sparked fresh optimism that the recession may be over. The surge in commodity prices boosted the Australian, New Zealand and Canadian dollars. Aud/usd hit an intra-day high at 0.8287, nzd/usd rose from 0.6477 to 0.6545 while cad/usd slid from 1.0910 to 1.0803.
In Asian trade, China’s benchmark Shanghai Composite index closed up 1.7%, recovering some of the previous day’s 5% losses after PBOC Vice Governor Su Ning reiterated 'loose momentary policies' would not be reversed.
Data to be released on Friday include U.K Gfk survey, Japan manufacturing PMI, household spending, CPI, unemployment rate and housing starts, eurozone HICP data, unemployment rate, Switzerland KOF indicator, U.S. GDP, PCE index, Chicago PMI and Canada GDP.