The dollar traded lower on Thursday as US stocks hit a new yearly high. The US trade deficit widened more than expected and initial jobless claims declined more than anticipated. The dollar index fell for a fifth consecutive day to 76.80, approaching the 76-area support. The S&P 500 rose 10.77 points to 1,044.14, the highest closing since October 6, 2008. The USD/JPY was lower, testing the 91.50-area support for a second day. The euro rose. European Central Bank Governing Council members Axel Weber and Yves Mersch signaled that the ECB will not remove any stimulus for the foreseeable future. The commodity currencies appreciated marginally on concerns over the Chinese economic outlook. Premier Wen said China’s economic recovery is “unstable, unbalanced and not yet solid.” Australia’s employment declined more than expected. The Bank of Canada left its benchmark interest rate unchanged at 0.25%, as expected, and said “persistent strength in the Canadian dollar remains a risk to growth.” We are buying the EUR/USD and also buying the USD/CHF on speculation the Swiss National bank will intervene to lower the franc value.
The GBP/USD rose as the Bank of England kept its asset purchasing plan at £175 billion and maintained the key interest rate at 0.50%, as forecast. Some investors had expected an increase in the BOE’s quantitative easing program. The pair was also supported by increasing risk appetite and rising UK home prices. The GBP/USD outlook improved as the pair rose above 1.66 today. There are resistance in the 1.70 area and support in the 1.64.
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