Dollar Extends Gains Against Euro After ECB Announcement

14:26, 23rd January 2015

(RTTNews) - The dollar is turning in a mixed performance at the end of the trading week. The U.S. currency is extending its gains against the Euro following the massive stimulus package announced by the European Central Bank yesterday. However, the buck is little changed against the pound sterling and is down against the Japanese Yen.

The ECB is slated to begin making combined monthly purchases of public and private sector securities in the amount of EUR 60 billion in March. The size of monthly asset purchases exceeded the EUR 50 billion reported in the press ahead of the central bank's monetary policy meeting.

The asset purchases are intended to be carried out until end-September 2016. They will remain in place until there is "a sustained adjustment in the path of inflation which is consistent with" the ECB's aim of achieving inflation rates below, but close to, 2 percent over the medium term, Draghi said in his customary post-decision press conference in Frankfurt.

Economic data from the U.S. was mixed on Friday. Existing home sales in the U.S. rose roughly in line with economist estimates in the month of December, according to a report released by the National Association of Realtors on Friday, with sales rebounding from the steep drop seen in November.

NAR said existing home sales rose 2.4 percent to a seasonally adjusted annual rate of 5.04 million in December after tumbling 6.3 percent to a downwardly revised 4.92 million in November. Economists had expected existing home sales to climb to an annual rate of 5.05 million from the 4.93 million originally reported for the previous month.

Reflecting positive contributions from a majority of components, the Conference Board released a report on Friday showing that its index of leading U.S. economic indicators rose by slightly more than anticipated in the month of December.

The Conference Board said its leading economic index climbed by 0.5 percent in December following a downwardly revised 0.4 percent increase in November. Economists had expected the index to rise by 0.4 percent compared to the 0.6 percent advance originally reported for the previous month.

The dollar climbed to a fresh 11-year high of $1.1114 against the Euro Friday morning, but has since eased back to around $1.1230.

Eurozone private sector grew at the fastest pace in five months in January, flash survey data from Markit Economics showed Friday. The composite output index rose more-than-expected to a five-month high of 52.2 in January from 51.4 in December. Economists has forecast it to rise to 51.7 nominally.

Germany's private sector remained in expansion territory in January, signaling a further rise in the private sector output. The flash composite output index rose to 52.6 in January from 52 in December. This was the strongest growth in three months.

The French private sector contracted further at the start of 2015, flash data from Markit Economics showed Friday. The composite output index fell to 49.5 in January from 49.7 in December.

French business confidence remained stable in January, survey data from the statistical office Insee showed Friday. The business confidence index for manufacturers held steady at 99 in January as expected by economists.

The buck rose to a high of $1.4951 against the pound sterling Friday morning, its highest level since about the middle of 2013. However, the U.S. currency has since pulled back to around $1.5010, nearly unchanged for the day.

British retail sales logged an unexpected growth in December, driven by food sales, while economists were looking for a decline after a rebound in November on Black Friday sales.

The volume of retail sales, including automotive fuel, increased 0.4 percent month-over-month in December, but the growth was slower than the 1.6 percent rise in November, figures from the Office for National Statistics showed Friday. Sales were expected to decline 0.6 percent.

Bank of Japan Governor Haruhiko Kuroda on Friday welcomed the European Central Bank's quantitative easing announcement. In an interview to Bloomberg Television in Davos, Switzerland, Kuroda said there divergence in the policy stance of the US Federal Reserve and the ECB was not much of a concern.

Kuroda said the Bank of Japan is willing to explore other stimulus options, when needed, if its path to the 2 percent inflation is significantly impacted. He was not specific regarding the available options.

The greenback retreated from an early high of Y118.732 against the Japanese Yen to around Y117.790 Friday afternoon.

The manufacturing sector in Japan continued to expand at an accelerated pace in January, the latest flash purchasing managers' index from Markit Economics and the Japan Materials Management Association revealed Friday.

The Markit/JMMA manufacturing purchasing managers' index, or PMI, edged up to 52.1 in January from 52 in December.