Markets

Euro Surges on ECB Announcement

Euro Surges on ECB Announcement

The euro jumped by more than a cent against the dollar, and surged as much as 0.7 percent on the day against the pound to reach 89.115 pence, its strongest position against the British currency since January.

Elsewhere, oil prices receded after Brent crude topped $70 per barrel on Thursday for the first time in more than three years.

Abridged minutes of a December meeting of the European Central Bank governing council said there was a "widely shared" view among officials that communication would need to evolve gradually based on the outlook for growth and inflation. The U.S. dollar fell to 0.9686 Swiss franc from 0.9761 Swiss francs, and it moved down to 1.2486 Canadian dollars from 1.2527 Canadian dollars.

With euro zone output eliminating spare capacity this year, policymakers argued that no further easing in financial conditions was needed, and some even warned about the European Central Bank falling behind the curve.

The Dow Jones Industrial Average rose 228.46 points, or 0.89 percent, to 25,803.19, the S&P 500 gained 18.68 points, or 0.67 percent, to 2,786.24, and the Nasdaq Composite added 49.29 points, or 0.68 percent, to 7,261.06. Separately, the United Kingdom goods trade deficit with the rest of the world widened slightly in November to GBP12.2 billion from the revised October figure of GBP11.7 billion. US Dollar to Euro Exchange Rate Drops on Continued Fed CautionFollowing the previous speech from Fed official Neel Kashkari, the US Dollar has been weakened again today by comments from Fed officials.

If things are worked out we could resume a nice gradual pace (of rate hikes) at that point, and still get the funds rate up to its natural level before too long'.




In May 2013, then-Fed chair Ben Bernanke sent global bond markets into a tailspin by suggesting the US central bank's bond buying could be reduced - an event known as the "taper tantrum".

USA inflation figures will be out sooner, with December's readings being announced on the afternoon of 12th January. Nonetheless, growth was below economists' expectations of 2.4 percent.

In the US, the Labor Department reported that weekly jobless claims rose by 11,000 to 261,000 new claims, a three-month high.

Also of interest will be U.S. data on December producer prices due at the same time as jobless claims figures (1330 GMT). Standard variable mortgage rates would also be likely to rise, though as costs here are already above the European Union average it is not clear if they would rise exactly in line with ECB increases.

Two-year U.S. Treasury yields jumped to over 2 percent to their highest since September 2008.

In politics, any developments on NAFTA negotiations will be closely watched; sources yesterday saying that US President Donald Trump will soon announce withdrawing from the trade agreement led to weakness in the loonie. The RSI, which has also been moving sideways close to the 50 neutral-perceived level throughout this period, is supporting this view.


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