The dollar is gaining ground against its major rivals on Thursday, following the release of some better than expected economic data. U.S. weekly jobless claims unexpectedly came in with a slightly decline, while the trade deficit shrank by more than expected.
The intensification of fiscal consolidation in some euro area nations and higher uncertainty over debt crisis are set to weigh on overall growth prospects, results of the Survey of Professional Forecasters released with the European Central Bank monthly bulletin showed Thursday.
The Eurozone economy is forecast to shrink 0.3 percent this year, compared to the prior estimate of 0.2 percent fall. The 2013 growth outlook was lowered to 0.6 percent from 1 percent.
The European Central Bank considered the high borrowing costs faced by some euro area sovereigns was mainly driven by fears of a collapse of the euro and must be tackled through fiscal consolidation and structural reforms, according the bank’s monthly bulletin, released Thursday.
“Exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy,” the central bank said. “Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner,” it said.
The dollar extended its recent gains against the Euro on Thursday and reached a 4-day high of $1.2266.
The greenback also rebounded versus the pound sterling Thursday. The U.S. currency bounced back from a low of $1.5684, to around the $1.5600 level.
The U.K.’s visible trade gap widened to a record in the second quarter as weak demand for goods hampered exports that could act as a drag on the economy that is mired in recession. As exports declined more than imports, the visible trade deficit grew by GBP 3.2 billion to GBP 28.3 billion in the second quarter, the biggest since comparable records began in 1997, the Office for National Statistics said Thursday.
The Bank of Japan on Thursday decided to keep its stimulus program and key interest rate unchanged as the economy is expected to undergo a moderate recovery path.
The benchmark uncollateralized overnight call rate was kept steady at 0-0.1 percent and the total size of the stimulus program was maintained at JPY 70 trillion with the asset purchases of JPY 45 trillion and the credit facility of JPY 25 trillion.
The central bank retained its assessment that the economy has started to pick up moderately and is likely to return to a moderate recovery path as demand recovers.
The buck has risen above an early trading range versus the Japanese Yen and is challenging some resistance around the Y78.725 level.
Japanese consumer sentiment deteriorated more than expected in July, a monthly survey carried out by the Cabinet Office revealed Thursday. The corresponding index fell to 39.7 from 40.4 in July. The reading was forecast to ease to 40. All sub-components of the index weakened from the prior month level.
First-time claims for U.S. unemployment benefits unexpectedly showed a modest decrease in the week ended August 4th, according to a report released by the Labor Department on Thursday.
The report showed that initial jobless claims fell to 361,000 from the previous week’s revised figure of 367,000. Economists had expected jobless claims to edge up to 367,000 from the 365,000 originally reported for the previous week.
A notable increase in exports combined with a drop in imports combined to shrink the U.S. trade deficit by much more than expected in the month of June, according to figures released Thursday by the Commerce Department.
Commerce Department figures for June showed a total level of U.S. exports of $185 billion and a total level of U.S. imports of $227.9 billion, leading to a deficit of $42.9 billion. The deficit marks a 10.7 percent drop from the revised May level of $48 billion, which was downwardly revised from the $48.7 billion initially reported. While most economists had expected the deficit to narrow, most had predicted a far smaller drop to $47.5 billion.
U.S. wholesale inventories fell unexpectedly in June, according to figures released by the Commerce Department on Thursday, with wholesale sales dropping even further. The report said U.S. wholesale inventories were estimated at a seasonally adjusted level of $481.9 billion in June, a 0.2 percent decline from revised May levels.
May wholesale inventories, which had initially shown a 0.3 percent increase, were downwardly revised to show essentially no change for the month. Most economists had expected wholesale inventories for June to continue to increase, matching the 0.3 percent increase initially reported for May.