The greenback traded against its peers on Thursday as investors remained cautious about whether the Federal Reserve would change monetary policy anytime soon. The pound sterling fell in all areas on the hawkish grip of the Bank of England.
According to Reuters, the US economy is still far from peak employment and it is not time to change interest rates, New York Federal Reserve Chairman John Williams said Thursday. “Once the recovery is more complete and the economy is doing very well, then we can resume low interest rates and bring them back to more normal levels,” Williams said in a virtual conversation hosted by the College of Staten Island. “Now is not the time because the economy is still far from peaking jobs.” Williams said the United States was still short of about 7 million jobs before the pandemic. He said the higher prices seen recently would not last, with inflation expected to drop to around 2% next year.
Against the Japanese yen, the dollar briefly penetrated Wednesday’s high of 111.10 to hit a new nearly 15-month high of 111.11 in Asia. partly to cross-buying in jpy. The pair then rebounded in tandem with US yields at 110.91 before leveling off.
The single currency remained under pressure in Asia and edged down to a session low of 1.1919 at the European open before climbing back to an intraday high of 1.1956 in New York opened on euro cross-buys, particularly against the pound sterling. The pair then reduced its gains and fell back to 1.1921 in New York on a broad rally in USD before trading sideways.
The British pound saw choppy trading on Thursday as despite sideways trading within a narrow range in Asia, the price briefly hit session highs at 1.3986 in the European morning. However, the price then fell ahead of New York’s opening on the Bank of England’s dovish position and hit a session low of 1.3889 on the New York morning before rebounding to 1.3938. on a short blanket.
Reuters reported that the Bank of England kept the size of its stimulus package unchanged and left its benchmark interest rate at an all-time low of 0.1% on Thursday. Economists participating in a Reuters poll were not expecting any policy changes from the BoE while waiting to see if a surge in post-lockdown inflation turns out to be transitory and if unemployment rises when the government cuts its job protection program. The BoE said its monetary policy committee voted 8 to 1 to keep its government bond buying program at 875 billion pounds ($ 1.22 trillion). The MPC voted 9-0 to keep the bank rate unchanged and to leave its £ 20 billion stock of corporate bond purchases unchanged.
On the data front, Reuters detailed that fewer Americans filed new jobless claims last week as the job market recovery from the COVID-19 pandemic gains traction amid reopening economy, but a shortage of volunteer workers could hamper faster employment growth in the near term. Initial claims for state unemployment benefits fell from 7,000 to 411,000 seasonally adjusted for the week ended June 19, the Labor Department said Thursday. Claims rose the week before for the first time since late April, with economists blaming the rise on volatility in the wake of the May 31 holiday.
In a separate Commerce Department report on Thursday, economic growth confirmed accelerated in the first quarter, thanks to the massive fiscal stimulus. Gross domestic product grew at an annualized rate of 6.4% in the last quarter, the government said in its third growth estimate for the first three months of the year. This has not been revised from the estimate released last month. The economy grew at a rate of 4.3% in the fourth quarter.
Data to be released on Friday:
New Zealand imports, trade balance, exports, UK consumer confidence Gfk, CPI Japan Tokyo, German consumer sentiment Gfk, Italian consumer confidence, trade balance, US CBI distribution trade, personal income, personal expenditure, PCE price and sentiment from the University of Michigan.