The dollar swung gains and losses against the British pound and euro on volatile Thursday following weak U.K. retail sales data and rumo central bank intervention. In addition, the mixed U.S. jobless claims data and Philadelphia Fed survey somehow increased dramatic volatility to the foreign exchange market.
In European morning, the British pound staged a rebound to as high as 1.6469 versus the dollar, however, cable was unable to grab a foothold above the 1.6400 level and it tumbled in part due to cross selling with eur/gbp jumped from 0.8492 to 0.8606 while gbp/jpy dropped from 158.08 to 154.98. U.K. retail sales unexpectedly slipped to –0.6% in May from 0.9% in April. This worse-than-expected retail sales data weighed on sterling as the data disappointed investors for this was the first decline in three months. There was some talk that U.K. financial shares will be under pressure if BOE Governor Mervyn King's plans to restrict the size of banks are carried through. In New York morning, the pound staged a strong rebound to 1.6399 against the dollar after the release of U.S. jobless claims (608,000 compared to the readings of 601,000 from the previous week) that was the largest one-week drop since November 2001 and the stronger-than-expected Philadelphia Fed survey that bolstered hopes that U.S. economy was on a stable path to recovery.
In European session earlier, euro rallied to 1.5130 versus Swiss franc after Swiss Nation Bank left interest rates unchanged at 0.25% as widely expected but euro tumbled to 1.5025 after SNB Governor Roth stated that the central bank had achieved its aim with foreign exchange intervention was successful and controlling the franc's rise against the euro. The pair then rebounded strongly to 1.5149 on rumors of central bank intervention, however, Bank of International Settlement (BIS), ECB and SNB have all declined to comment.
Ahead of New York opening, euro gyrated inside a 100-point trading range against the greenback, however, the single currency rose to as high as 1.4002 versus the dollar after the release of jobless claim (June was 608k vs May 615k). Then euro tumbled from there as news of a change in the definition of the London interbank boosted speculations yields on U.S. investments will move higher.
Data to be released on Friday are BoJ minutes, German PPI, and Canada retail sales.