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05.06.2014 15:39

Foreign exchange market. American session: the euro hits 4-month lows against the U.S. dollar after the European Central Bank’s interest rate cut, but later recovered its losses and traded higher

The U.S. dollar traded lower against after the European Central Bank’s press conference and ahead of the U.S. job market data on Friday. The number of initial jobless claims in the week ending May 31 in the U.S. rose by 8,000 to 312,000 from 304,000 the previous week. The previous week figure was revised up from 300,000. Analysts had expected initial jobless claims to increase by 6,000 to 310,000.

The euro hits 4-month lows against the U.S. dollar after the European Central Bank cut its interest rate to 0.15% from 0.25%, but later recovered its losses and traded higher. Analysts had expected a cut to 0.1%.

The ECB also cut its marginal lending to 0.40% from 0.75% and reduced its deposit rate to -0.10% from 0.0%. The European Central Bank is the world’s first major central bank to use a negative rate. The deposit rate of -0.10% means that commercial bank will be charged for holding their reserves. This measure should spur commercial banks to ramp up lending.

Retail sales in the Eurozone climbed 0.4% in April, exceeding expectations for a 0.1% gain, after a 0.3% increase in March. On a yearly basis, retail sales in the Eurozone rose 2.4% in April, exceeding expectations for a 1.3% increase, after a 0.9% gain in March.

German factory orders surged 3.1% in April, beating expectations for a 1.3% rise, after a 2.8% decrease in March.

The British pound increased against the U.S. dollar after the Bank of England’s interest rate decision. The BoE kept its interest rate unchanged at record low 0.50%. The stimulus program of the Bank of England remained unchanged at 375 billion pounds. Investors had expected this decision. Investors expect the BoE will raise interest rate in the first half of next year.

Earlier in the trading session, the U.K. house prices were released. The U.K. Halifax house price index increased 3.9% in May, exceeding expectations for a 0.4% rise, after a 0.3% decline in April. April’s figure was revised down from a 0.2% fall.

The Canadian dollar traded mixed against the U.S. dollar after the release of the Canadian building permits and the Ivey purchasing managers’ index. The building permits in Canada increased 1.1% in April, missing expectations for a 1.4% gain, after a 3.2% decline in March. March’s figure was revised down from a 3.0% decrease.

The Ivey purchasing managers’ index for Canada dropped to 48.2 in May from 54.1 in April, missing expectations for an increase to 58.6.

The New Zealand dollar increased against the U.S dollar recovering this week’s losses. A decline in dairy prices had a negative impact on the kiwi. No economic data was published in New Zealand.

The Australian dollar climbed against the U.S. dollar. The Australian trade deficit was A$122 million in April, after a surplus of A$902 million in March. March’s figure was revised up from a surplus of A$731 million. Analysts had expected an A$300 million surplus. Exports declined 1.5% caused by lower commodity prices.

The HSBC services purchase managers’ index for China sank to 50.7 in May from 51.4 in April.

The Japanese yen traded higher against the U.S. dollar. No economic data was released in Japan.

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