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Dollar Recovering Following Draghi Comments

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The dollar weakened against all of its major rivals in early trade Thursday. However, the buck has begun to recover some ground following comments from European Central Bank President Mario Draghi.

The European Central Bank left its interest rates and asset purchases unchanged and retained its downward bias on asset purchases. The Governing Council, led by ECB President Draghi, kept all its three interest rates unchanged for a twelfth consecutive policy session, on Thursday.

The bank also retained its monthly asset purchases of EUR 60 billion that are set to run till December 2017. The size was reduced in March from EUR 80 billion.

The ECB may decide on the future of its massive stimulus in October even as policymakers are worried about the risks that a strengthening euro pose to the inflation outlook, the bank's chief Mario Draghi said Thursday.

"This autumn we will decide on the calibration of our policy instruments beyond the end of the year," ECB President Draghi said in his post-decision press conference in Frankfurt.

Policymakers held "very preliminary" discussions on quantitative easing this time, while policy sequencing and bond scarcity issues were not discussed, Draghi told reporters.

The pros and cons of various policy scenarios were discussed and "probably the bulk of these decisions will be taken in October", he said.

The dollar dropped to over a 1-week low of $1.2058 against the Euro Thursday, but has since bounced back to around $1.20.

The euro area economy expanded at a slightly faster pace in the second quarter, latest data from Eurostat showed Thursday. Gross domestic product grew 0.6 percent sequentially in the second quarter, faster than the 0.5 percent expansion seen in the first quarter. The rate came in line with the estimate released on August 16.

Germany's industrial production remained unchanged in July, data from Destatis showed Thursday. Industrial production showed nil growth following a 1.1 percent decrease in June. Output was forecast to grow 0.5 percent.

The French trade deficit widened in July, as imports grew faster than exports, data from the customs office showed Thursday. The trade shortfall rose to EUR 5.97 billion in July from EUR 4.88 billion in June.

France's current account deficit increased in July, data from the Bank of France showed Thursday. The seasonally and working-day-adjusted current account deficit rose to EUR 4.2 billion in July from EUR 2.4 billion in the previous month.

The buck fell to a 1-month low of $1.3115 against the pound sterling Thursday, but has since rebounded to around $1.3075.

UK house prices increased at a faster pace in August, data from the mortgage lender Halifax and IHS Markit showed Thursday. House prices advanced 2.6 percent year-on-year in three months to August, faster than the 2.1 percent increase seen in three months to July. The annual growth was forecast to stagnate at 2.1 percent.

The greenback sank to nearly a 5-month low of Y108.044 against the Japanese Yen Thursday, but has since recovered to around Y108.550.

Japan's leading index declined more than expected in July, survey data from the Cabinet Office showed Thursday. The leading index, which measures the future economic activity, fell more-than-expected to 105.0 in July from 105.7 in June. The reading was forecast to fall to 105.1.

Following last Friday's disappointing monthly jobs report, the Labor Department released a report on Thursday showing a sharp increase in first-time claims for U.S. unemployment benefits in the week ended September 2nd.

The report said initial jobless claims jumped to 298,000, an increase of 62,000 from the previous week's unrevised level of 236,000. Economists had expected jobless claims to rise to 241,000.

A report released by the Labor Department on Thursday showed U.S. labor productivity increased by more than initially estimated in the second quarter, while unit labor costs rose by less than initially estimated.

The Labor Department said labor productivity climbed by 1.5 percent in the second quarter compared to the previously reported 0.9 percent increase. Economists had expected the pace of productivity growth to be upwardly revised to 1.3 percent.

Meanwhile, the report said unit labor costs rose by 0.2 percent during the quarter compared to the previously reported 0.6 percent growth. Unit labor costs had been expected to rise by a revised 0.3 percent.

by RTT Staff Writer

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