Thursday, 8 November 2012

Daily Afternoon Report 08/11/2012

The U.S. dollar remained broadly higher against the other major currencies on Thursday, as concerns over U.S. fiscal policy supported dollar demand, while investors awaited the European Central Bank’s post-policy meeting press conference later in the day.

Overall market sentiment continued to be weighed by concerns over the U.S. fiscal cliff, automatic tax hikes and spending cuts due to come into effect on January 1 unless lawmakers can reach an agreement, which could threaten U.S. and global growth, while the applications for jobless benefits fell by 8,000 to 355,000 in the week ended Nov. 3, as the Labour Department announced today.

The euro remained under pressure after a successful Spanish bond auction on Thursday eased pressure on Prime Minister Mariano Rajoy to request a bailout before the end of this year.
Later on, the euro turned even lower against the U.S. dollar on Thursday, trading close to a two-month low after European Central Bank President Mario Draghi said that economic activity in the euro area is expected to remain weak in the near future.

Speaking at a press conference following the ECB's November policy meeting, Draghi said that the bank expects the euro zone economy to remain weak "in the near term", but financial market confidence "has visibly improved on the back of our decisions as regards Outright Monetary Transactions," he added, referring to the bank's bond buying program unveiled in September.

Elsewhere, Sterling found support after the Bank of England said it was maintaining the benchmark interest rate at 0.50% and the size of its asset purchase program unchanged at GBP375 billion, following its policy-setting meeting.

In other news, official data earlier showed that the Australian economy added 10,700 jobs in October, far more than the expected 200 increase, while the unemployment rate remained unchanged at 5.4%, beating expectations for a rise to 5.5%. Finally, the New Zealand, government data showed that the unemployment rate jumped to 7.3% in the third quarter, up from 6.8% in the previous quarter and a 13-year high.

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