Most dollar based pairs traded in a wide range on Thursday as major economic reports from a number of regions and anticipation of the release of the stress test results after the market close caused increased volatility. The dollar closed the day mixed overall, strengthening against the pound, Canadian dollar and Japanese yen but weakened against the euro, and Australian dollar and trading flat against the Swiss franc.
The European Central Bank lowered interest rates by 50 basis points, as expected, and said they plan to buy 60 billion euro in covered bonds. The Bank of England kept rates on hold, which was also expected, but announced it will spend an additional 50 billion pounds of new money. Equity markets moved lower on the day as traders await the results of the stress tests and on a weak auction of 30 year Treasury bonds.
The Labor Department reported this morning that initial jobless claims continued to drop last week, falling 34,000 to 601,000 from 635,000 the prior week. In addition, productivity rose and although two weeks of falling initial claims does not make a trend, coupled with yesterday’s better than expected ADP report, there is hope that tomorrow’s Non-Farm Payroll release may produce a positive surprise. U.S. consumer credit fell a record amount in March as unemployment continued to increase and consumers found it harder to get loans. Consumer credit came in at -11.1B on a monthly basis, much lower than the expected read of -4.2B.