The dollar fell on Thursday after under-par jobless figures and the memory of the recent negative GDP result weighed on demand. Yesterday's FOMC noted that “growth paused” in the last few months which implied monetary policy would remain accommodative further weakening the greenback. Initial Jobless Claims (Jan 27) rose to 368k from 330k when a 351k result had been expected, leading to fears that Friday's Non-Farm Payrolls might also show an unexpected drop. Other data showed Personal Income rose by 2.6% from 0.6% previously when a 0.8% print had been expected. Personal Spending slowed to 0.2% in December versus 0.3% expected and 0.4% previously. Chicago PMI rose to 55.6 from 50.0 when a rise to only 50.5 had been the consensus estimate.
The single currency strengthened on Thursday after figures showed Germany's unemployment rate fell to 6.8% in Jan from an expected 6.9% in December. Other data was mixed, however, with German Retail Sales (Dec) falling by a much more savage -4.7% y/y compared to the -1.5% fall expected. M/m it fell by -1.7% from 0.6% previously when a -0.1% fall had been forecast. German Unemployment Change was also positive in January, showing a fall of -16k from -2k when a rise to 8k had been expected. German CPI (Jan) y/y showed a bit of a slow-down in activity with a drop from 2.1% to 1.7% and CPI – E.U Harmonised fell by a basis point to 1.9% y/y.
The pound strengthened considerably on Thursday as a result of improved data which showed an rise in consumer confidence and stabilization in house prices. Gfk Consumer Sentiment recovered to -25 in January and Nationwide House Prices n.s.a (Jan) y/y rose to 0.0% from -1.0% previously – this was better than the -0.3% fall expected. M/m in January Nationwide House Prices rose by 0.5% when a 0.2% increase had been expected. Sterling also benefited from weakness in the dollar and the yen which both saw more doveish monetary policy statements from leading central banks officials.
The yen weakened further on Thursday after the Deputy Governor of the BOJ HirohideYamaguchi said that the central bank would use further stimulus if economic and price conditions warranted it. “It could be the case further accommodation will be pursued.” he added, increasing the existing body of evidence pointing to the likelihood of the BOJ using more aggressive monetary policy measures – although he rejected criticism that the BOJ was actively trying to weaken the yen. Other data showed an unexpected slowdown in Housing Starts – although they still showed a rise of 10.0% y/y in December. Finally Labour Cash Earnings (Dec) fell by -1.4% y/y from -0.8% previously.