The dollar is gaining ground against all of its competitors on Thursday. The currency surged against the Euro, after the European Central Bank decided to reduce its interest rate. The Federal Reserve on Wednesday maintained its $85 billion per month asset purchase program, hoping to steer the U.S. economy through yet another rough patch.
The Fed expects "economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate," according to a statement released following its two-day meeting.
The European Central Bank cut its key interest rate to a record low on Thursday as the 17-nation economy revealed increasing weakness in recent weeks. Following its meeting in the Slovak capital Bratislava, the Governing Council led by ECB President Mario Draghi reduced the main refinancing rate by 25 basis points to a record low 0.50 percent.
The latest cut came after the bank held the rate steady at 0.75 percent for nine consecutive months. Though the move was widely expected, analysts fear it may not be enough without efforts to boost bank lending.
The bank also lowered the marginal lending facility rate to 1 percent from 1.50 percent. The deposit rate, which is already at zero, was left unchanged.
European Central Bank President Mario Draghi on Thursday did not rule out further easing in euro area interest rates in future after the bank cut the main refinancing rate to a record low in the backdrop of increasing weakness in the economy. He also hinted at the prospect of negative deposit rates.
"Our monetary policy stance will remain accommodative for as long as needed," Draghi said in his introductory statement at the post-decision press conference. He reiterated that the bank "stands ready to act" when needed."The cut in interest rates should contribute to support prospects for a recovery later in the year," Draghi said. "These decisions are consistent with low underlying price pressure over the medium term."
Leaving the door open for more policy easing, he also said the bank is "technically ready" for negative deposit rates. While saying that the bank has an "open mind" towards such a move, he also drew attention to the adverse consequences of it.
The dollar dipped to an early low of $1.3218 against the Euro Thursday, but has since broken out to a 3-session high of $1.3036.
Eurozone manufacturing activity contracted at a slower than estimated pace in April, final data from Markit Economics showed Thursday. The Purchasing Managers' Index fell marginally to 46.7 in April, from 46.8 in March. It was marginally above the earlier flash estimate of 46.5. The seasonally adjusted reading signaled contraction for the twenty-first successive month.
Activity in Germany's manufacturing sector decreased at a slower rate than previously estimated in April, final data from a survey by Markit Economics and BME showed Thursday. The seasonally adjusted purchasing managers' index for the manufacturing sector came in at 48.1 in April, higher than 47.9 seen in the flash estimates. However, the latest figure was lower than March's 49 and indicated the most marked deterioration in business conditions since December 2012.
French manufacturing activity declined at a slower pace in April, final results of a survey by Markit Economics showed Thursday. The headline purchasing managers' index rose to 44.4 in April from 44 in March. This matched the preliminary PMI score.
The U.K. government should increase their borrowing to finance infrastructure projects as a way to kick start economic recovery, the leading think tank National Institute for Economic and Social Research said Thursday.
The research institute raised their growth outlook for 2013 to 0.9 percent from the 0.7 percent expansion projected in February. The growth is forecast to rise further to 1.5 percent in 2014.
The greenback dipped to a low of $1.5590 against the pound sterling Thursday, but has since climbed to a 2-day high of $1.5495.
The British construction sector contracted at a notably slower rate in April, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics (CIPS) showed Thursday. The seasonally adjusted purchasing managers' index (PMI) for the construction sector rose to 49.4 in April from 47.2 in March, indicating the slowest decline in activity in the current six-month period of falling activity.
Policymakers at Bank of Japan agreed that the bank should shift away from incremental monetary easing and convince the markets that it is determined to take all possible measures to achieve 2 percent inflation target, minutes from BoJ's April 3-4 meeting showed Thursday.
"Members concurred that the Bank should shift away from its gradualistic approach and stop adopting easing measures in an incremental manner," the minutes showed.
Meanwhile, some members expressed the view that it was important for the Bank to introduce a policy that would have an impact in terms of scale, so that the markets would perceive that it had decided to take all necessary measures to achieve the price stability target of 2 percent.
The buck traded around the Y97.250 level against the Japanese Yen Thursday morning, but has since risen to around Y98.000.
Offsetting some of the recent concerns about the labor market, the Labor Department released a report on Thursday showing that first-time claims for U.S. unemployment benefits unexpectedly fell to a five-year low in the week ended April 27th.
The report showed that initial jobless claims fell to 324,000, a decrease of 18,000 from the previous week's revised figure of 342,000. The drop in jobless claims came as a surprise to economists, who had expected claims to edge up to 345,000 from the 339,000 originally reported for the previous week.
With the value of imports falling at a much faster rate than the value of exports, the Commerce Department released a report on Thursday showing that the U.S. trade deficit narrowed by much more than expected in the month of March.
The Commerce Department said the trade deficit narrowed to $38.8 billion in March from a revised $43.6 billion in February. Economists had expected the deficit to dip to $42.4 billion from the $43.0 billion originally reported for the previous month.
While the Labor Department released a report on Thursday showing that U.S. labor productivity rebounded in the first quarter of 2013 after falling in the fourth quarter of 2012, the pace of growth fell short of economist estimates.
The report said labor productivity increased by 0.7 percent in the first quarter following a revised 1.7 percent decrease in the fourth quarter. Economists had expected productivity to increase by about 1.3 percent compared to the 1.9 percent drop that had been reported for the previous quarter.
The report also showed that unit labor costs edged up by 0.5 percent in the first quarter after surging up by 4.4 percent in the fourth quarter. Labor costs had been expected to inch up by just 0.1 percent.
Investors will be watching for the release of the all important U.S. jobs report for April, which is due Friday morning.
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Market Analysis
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.