The dollar rallied sharply against the sterling, advancing by over 270-pips to 1.6759 while pushing the euro lower to 1.4336. Weekly jobless claims improved by more than expected, falling to 550k and larger than the expected drop to 580k from 584k a week earlier.
Traders will closely scrutinize tomorrow's July labor report, due out at 8:30 AM. The unemployment rate is seen edging up to its highest level in over 20-years at 9.7%. Meanwhile, the non-farm payrolls reading is expected to improve sharply, posting a loss of 320k jobs, versus 467k jobs lost in June.
Sterling Plunges on BoE
The pound was sharply lower against the dollar on Thursday, tumbling by over 270-points from its session high at 1.7030 to break beneath the 1.68-level to 1.6759. The catalyst for the sell-off was the Bank of England's monetary policy announcement earlier today. Although the BoE left interest rates unchanged at 0.5% -- which was largely expected, the Bank also announced an increase it its asset purchase program by 50 billion pounds to 175 billion pounds.
In the accompanying statement, the Bank stated that in the UK, the recession appears to have been deeper than previously thought while also adding that the pace of contraction has moderated and business surveys suggest that the trough in output is close at hand.
Cable remains mired beneath the 1.68-level, holding steady around 1.6775. Support starts at 1.6740 followed by 1.67 and 1.6660. Subsequent floors are eyed at 1.6620, backed by 1.66 and 1.6550.
Euro Dragged Lower
The ECB left monetary policy unchanged, as largely expected at 1.0%. In the accompanying press conference from Bank President Trichet, he downplayed the prospects for additional quantitative easing, saying rates were currently appropriate and adding that the overall mood today is a little bit better than it was before. Moreover, Trichet said that the Bank would rein back its lax monetary policy once it becomes clear the Eurozone economy has turned the corner. He added there are increasing signs that the global recession is bottoming out.
EURUSD continues to trade near the 1.4330-level, with support starting at 1.43, followed by 1.4270 and 1.4240. Subsequent floors are eyed at 1.42, backed by 1.4150 and 1.41. On the upside, resistance is seen at 1.4365, backed by 1.44 and 1.4435. Additional gains will target subsequent ceilings at 1.4470, followed by 1.45 and 1.4540.