Forex – Dollar Retreats as Euro Rebounds, U.S. Data Weighs

Investing.com – The dollar gave up gains against a currency basket on Thursday as the euro jumped higher on hawkish European Central Bank minutes and as disappointing U.S. economic data weighed.

EUR/USD hit a high of 1.2040 and was at 1.2036 by 09:01 AM ET (14:01 GMT), up 0.79% for the day.

The euro strengthened after the minutes of the European Central Bank’s December meeting said officials could consider a gradual shift in policy guidance from early 2018.

Any changes to the bank’s guidance would likely be seen by investors as an indication that policymakers are preparing to start winding down their bond buying stimulus program.

The minutes also showed that policymakers see a “continued robust and increasingly self-sustaining economic expansion.”

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.37% at 91.77 as the stronger euro weighed.

Sentiment on the dollar was also hit after reports showing that U.S. producer prices unexpectedly fell in December, the first drop in almost one-and-a-half years, while initial jobless claims unexpectedly rose last week.

The Labor Department reported that its producer price index slipped 0.1% last month, the first decline since August 2016.

A separate report showed that initial claims for unemployment benefits increased by 11,000 to 261,000 last week, the highest level since late September.

The dollar pared back gains against the yen, with USD/JPY last at 111.48, down from an earlier high of 111.88.

The dollar had rebounded from six-week lows against the yen earlier on Thursday after China’s foreign exchange regulator said a report about Beijing slowing or halting U.S. treasury purchases could be wrong.

The greenback remained slightly higher against its Canadian counterpart, with USD/CAD edging up 0.10% to 1.2561, not far from Wednesday’s highs of 1.2582.

The loonie remained on the defensive as expectations for a rate hike by the Bank of Canada next week diminished amid concerns that the U.S. is about to withdraw from the North American Free Trade Agreement.