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What’s happening: The US dollar recorded losses on Thursday, as investors assessed several economic reports.
What happened: The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell to a three-day low during Thursday’s session.
The British pound gained versus the US dollar, a day after recording its sharpest decline in two months.
Why it matters: Data released on Thursday showed the number of people filing new claims for jobless benefits rose slightly by 2,000 to 205,000 last week. The figure was better than market expectations of 215,000, signalling underlying strength in the US economy.
Another data release showed US GDP (gross domestic product) expanded at an annual rate of 4.9% in the third quarter, lower than the 5.2% released in the second estimate. The Philadelphia Fed Manufacturing Index fell to a reading of -10.5 in December, from -5.9 in November. The figure came in significantly below market estimates of -3.
Last week, the Federal Reserve had kept its federal funds rate target unchanged in the range of 5.25%-5.5%, with policymakers suggesting rate cuts to 4.6% by the end of 2024.
The US dollar index fell around 0.5% to 101.84 on Thursday. The USD/JPY forex pair fell sharply on Thursday, after Japan’s government increased its economic growth forecast for this fiscal year. However, the Japanese currency is still down around 8% versus the greenback year to date.
The GBP/USD forex pair gained around 0.4% to reach 1.2689 on Thursday, a day after recording its sharpest decline in two months after data showed UK inflation easing to a two-year low of 3.9% in October, which raised prospects of the Bank of England cutting interest rates as early as in May.
Wall Street stocks settled higher on Thursday, with the Dow Jones index gaining more than 300 points and Nasdaq 100 adding around 200 points.
What to watch: Investors await the release of data on US core personal consumption expenditure index. The US core PCE price index, the Fed’s preferred gauge to measure inflation, is expected to increase by 3.4% year-over-year in November, a slowdown from 3.5% recorded in October. A slowdown in inflation could trigger more speculations of the Fed starting to ease its monetary policy sooner.
Data on durable goods orders, consumer sentiment and new home sales will also be released today. New orders for manufactured durable goods in the US, which fell by 5.4% in October, are expected to increase 1.8% in November. Analysts expect the University of Michigan’s consumer sentiment to improve to 69.4 in December, from 61.3 a month ago. New Home Sales in the US, which fell 5.6% in October, is projected to increase by 1.2% in November.
Context: London stocks closed lower on Thursday, snapping a three-session winning streak.
Details: British stocks had outperformed their European peers on Wednesday, after data showed a surprise decline in UK’s inflation levels.
However, UK stocks retreated on Thursday, with the recent rally in global stocks on prospects of rate cuts by major global central banks came to a halt after US stocks recorded sharp losses on Wednesday.
Global equity markets had maintained an uptrend since last week when the US central bank signalled rate cuts next year.
On the economic data front, the Confederation of British Industry’s monthly retail sales balance fell to -32 in December, from the previous month’s reading of -11. The figure was also much worse than market estimates of -12. Public sector net borrowing, excluding public sector banks, came in at £14.33 billion for November, £0.9 billion less than in the year-ago month.
London’s FTSE 100 fell 0.27% to close at 7,694.73 on Thursday. Personal goods stocks were among the worst performers, declining to a three-week low, while stocks of automobiles and parts rose around 0.6%, lending some support to the equity market on Thursday.
The more domestically focussed FTSE 250 Index shed 0.3% to settle at 19,570.97 on Thursday.
Shares of Vodafone rose over 2% on Thursday, after reports of Swisscom AG considering a bid for the company’s Italian operations early next year. Harbour Energy’s shares jumped 21% after the company agreed to acquire Wintershall Dea’s upstream assets.
What to watch: Investors await the release of economic data on retail sales, current account and GDP growth rate from the UK today. Retail sales in the UK, which declined by 0.3% in October, are expected to increase 0.6% in November. Analysts expect the current account gap in the UK to shrink to £16.3 billion in the third quarter, from £25.3 billion in the second quarter. The British economy is expected to expand 0.6% year-over-year in the third quarter, the same as in the prior quarter.
Other Markets: European indices closed lower on Thursday, with the DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.27%, 0.16% and 0.21%, respectively.
Russia said it would retaliate in kind if the European Union considered going ahead with its plans to reallocate profits generated from Russia’s frozen assets to Ukraine. The news sent the RUB/USD forex pair lower this morning.
UK’s car production climbed 14.8% year-over-year to 91,923 units in November. This being the ninth month of growth this year lent support to the GBP/USD forex pair.
Japan’s core consumer price index increased 2.5% in November, decelerating from the 2.9% rise in October, which sent the JPY/USD pair lower in forex trading this morning.
Canada’s retail sales seen stagnating in November, according to preliminary estimates. This being lower than the 0.7% growth reported in October exerted pressure on the CAD/USD forex pair.
Macau’s tourist arrivals jumped 604.9% year-over-year to 2,583,597 in November, sending the MOP/USD pair higher in forex trading this morning.
Germany’s import prices, UK’s business investment, France’s consumer confidence and producer prices, Spain’s GDP growth rate, Turkey’s tourist arrivals, Italy’s manufacturing confidence index, consumer confidence index and industrial sales, Brazil’s current account, foreign direct investment and FGV consumer confidence, India’s foreign exchange reserves and monetary policy meeting minutes, Mexico’s balance of trade and economic activity, Canada’s GDP, manufacturing sales, wholesale sales and government budget value, as well as US Baker Hughes crude oil rigs and building permits.
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