The dollar swung gains and losses against the British pound and euro on volatile Thursday following Bank of England and European Central Bank left the rates unchanged at record low level. In addition, the upbeat U.S. jobless claims data boosted stock markets on hopes that the U.S economy is on the track to recovery, dampened the demand for greenback as safe-haven asset in New York session.
Although the single currency staged a rebound from Wednesday's low of 1.4109 in European morning against the dollar to as high as 1.4242, euro fell sharply to 1.4070 after European Central Bank kept key interest rates on hold at record low at 1.0% as investors concerned over ECB would have further rate cut. However, euro pared its losses after ECB President Jean-Claude Trichet commented the current interest rate levels are appropriate and said he sees signs the worst of the recession has passed. Furthermore, U.S. weekly jobless claims fell for a third straight week to 621,000 from 625,000 in the previous week encouraging investors to be more risk-aggressive.
In European, the British pound rebounded to as high as 1.6436 against the dollar as Halifax house price came out much better than expected at 2.6% in May versus the reading of decreased by 1.7% in April before easing while traders booked profits ahead of Bank of England rate decision. Cable edged up after BoE announced to leave the interest rates unchanged at 0.5% and the policymakers would keep their plans to buy 125 billion pounds of government and corporate bonds as they have official evidence indicated the slump is easing. However, the British pound nose-dived against the greenback on rumours that British Prime Minister Gordon Brown would resign. The pair recovered after Brown’s office dismissed the rumours as “absolute nonsense.”
Bank of Canada maintained key rate at 0.25% and suggested cautious on the rapid rise on Canadian dollar would fully offset the improvement in commodity prices, usd/cad rose to as high as 1.1161 in New York morning. However, surge in crude oil futures (up more than 2%) and gains on equity pressured the greenback to intra-day of 1.0929 in late U.S. session before recovery.
Data to be released on Friday includes Switzerland CPI, U.K. PPI, Canada unemployment rate, U.S. unemployment rate, non-farm payrolls and averaged hourly earnings.