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What’s happening: The US dollar recorded gains on Thursday, following the release of economic data.
What happened: The US released several major economic reports on Thursday, and most were better than expected.
The European Central Bank raised its interest rates again but signalled an end to its tightening cycle.
Why it matters: The US released retail sales data which showed 0.6% growth in August, up from 0.5% growth in July. Driven by higher gasoline prices, the retail sales figure topped market expectations of a 0.2% rise.
Initial jobless claims rose by 3,000 to 220,000 in the latest week but came in better than market estimates of 225,000 claims.
Higher gasoline prices also impacted the latest inflation report. The producer price index for final demand rose by 0.7% in August, the most in over a year. This also beat Wall Street expectations of 0.4% growth. Total business inventories came in flat in July.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.6% to 105.41 on Thursday, after reaching as high as 105.43 earlier in the session, its strongest level since March 9.
Despite upbeat economic reports from the US, traders widely expect the Federal Reserve to keep rates unchanged at its meeting next week. The reports did reduce speculations of the US central bank raising rates in November.
The euro fell versus the greenback on Thursday after the European Central Bank raised its key interest rate to a record high of 4% but signalled that this could be the last rate hike in the current monetary tightening cycle.
The EUR/USD forex pair dipped around 0.8% to 1.0643, after declining to 1.0629 earlier in the session, the lowest since March 17. The GBP/USD pair also fell sharply by around 0.6% to 1.2408 on Thursday, after declining to a three-month low of 1.2400.
What to watch: Traders now await another batch of major economic reports from the US today. Import prices in the US, which increased 0.4% in July, are expected to rise 0.5% in August. Export prices are projected to rise by 0.8% in August, following 0.7% growth in July.
Analysts expect the NY Empire State Manufacturing Index to improve to -8 in September, from -19 in August. Industrial production, which rose 1% in July, is likely to increase 0.2% in August.
Context: European stocks settled sharply higher on Thursday, following the European Central Bank’s decision to raise rates once again.
Details: European stocks recorded their biggest percentage surge in six months after the ECB raised interest rates by 25 basis points, increasing rates for the 10th time in a row, and sending its central bank’s main deposit facility to 4%, from -0.5% in June last year. However, policymakers signalled the end of the monetary tightening campaign.
Denmark’s central bank also increased its key interest rate by 25 bps, following the ECB’s decision.
The STOXX Europe 600 Index gained 1.52% to close at 460.86 on Thursday, with basic resources stocks recording the maximum gains, after China’s central bank announced plans to lower the reserve requirement ratio on most banks by 25 basis points. Auto stocks, bucked the overall market trend, falling by 0.4% during the session.
The FTSE 100 jumped by 1.95% to settle at 7,673.08 on Thursday, driven by gains in heavyweight mining stocks.
Germany’s DAX 40 gained 0.97%, while France’s CAC 40 added 1.19% to close at 7,308.67 on Thursday.
What to watch: Investors await the release of economic reports, like balance of trade, labour costs and wage growth, from the Eurozone today. The Eurozone, which posted a trade surplus of €23 billion in June, is expected to report a surplus of €20.0 billion in July. Analysts expect hourly labour costs to increase by 4.3% year-over-year in the second quarter, following 5% in the first quarter. Wages and salaries, which rose by 4.6% percent year-over-year in the first quarter, are expected to grow by 4.0% in the second quarter.
Other Markets: US trading indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.96%, 0.84% and 0.82%, respectively.
Romania imposed further flight restrictions in parts of its airspace along the Ukraine border. The news sent the safe-haven US dollar index higher this morning.
Brazil’s Industrial Entrepreneur Confidence Index declined by 1.3 points from the prior month to a reading of 51.9 in September, which exerted pressure on the BRL/USD forex pair.
Thailand’s consumer confidence index climbed to 56.9 in August, from 55.6 a month ago, which sent the THB/USD pair slightly higher in forex trading this morning.
Saudi Arabia’s annual inflation rate eased for the third straight month to 2% in August, from 2.3% a month ago, exerting slight pressure on the SAR/USD forex pair.
India’s wholesale prices declined 0.52% year-over-year in August, versus market projections of a 0.6% decline, which sent the INR/USD pair slightly higher in forex trading this morning.
France’s inflation rate and new passenger car registrations, Italy’s inflation rate, Turkey’s central government budget balance, Italy’s balance of trade, India’s foreign exchange reserves, Brazil’s retail sales, India’s balance of trade, Canada’s new motor vehicle sales, foreign investment in securities and manufacturing sales, as well as US University of Michigan consumer sentiment and Baker Hughes Crude Oil Rigs.
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