The U.S. dollar weakened against the majority of its counterparts overnight. With a number of risk events expected this morning, we anticipate a very choppy trading range for the U.S. dollar today. Both the European Central Bank and the Bank of England left their benchmark interest rates unchanged. However, the Bank of England increased its asset purchase program by 50 billion pounds to 325 billion pounds. Some economists expected the central bank to increase purchases by 75 billion pounds. ECB President Mario Draghi will hold a press conference this morning. At the same time, Bloomberg and CNBC are reporting that Greece’s government is set to announce a deal on austerity measures for a 130 billion euro financing package. Meanwhile, the economic docket in the U.S. showed that the number of Americans filing first-time claims for unemployment insurance payments unexpectedly declined last week, an additional sign that the labor market recovery is gaining traction. Applications for jobless benefits decreased 15K to 358K, Labor Department figures showed today. The print beat forecasts of 370K claims.
The ECB decided to keep interest rates unchanged at 1.00% this morning, as the spotlight will once again shine on Greece’s ability to come to terms on a debt-swap solution. Greek politicians have reportedly reached a deal on austerity measures as of this morning; yet have not announced any specifics as of writing. In a press conference this morning, ECB President Draghi said that the Greek Prime Minister has informed him that a deal has been met for Greece. The direction of the euro will rely heavily on further comments from Draghi and details that will emerge today surrounding this Greek odyssey.
The Sterling strengthened against the U.S. dollar after the Bank of England increased its quantitative easing program by an additional 50 billion pounds in an attempt to insulate the U.K. economy from the deepening debt issues in the Euro zone. Some economists expected the central bank to increase purchases by 75 billion pounds. This is the first increase in QE since October, and the total bond-buying program is now at 325 billion pounds. Industrial production increased more than expected in December at 0.5%, up 1.1% from November. Manufacturing production also improved, up 1.2% from the previous month. The BOE kept interest rates unchanged at 0.50%, as expected.
