The dollar held onto most gains made after the FOMC statement although traded a bit more mixed today. Further gains were capped by lower US GDP numbers and higher jobless claims.
The euro was lifted by stronger Eurozone confidence data and more upbeat German inflation data.
Confidence in the euro-area economy surprised to the upside and rose for a fourth consecutive month in October to 105.9, compared to expectations of a drop to 105.1.
Preliminary German CPI data was unchanged in October from a month ago and ticked up to an annual rate of 0.3% versus an expected 0.2%.
The data helped the euro bounce throughout the session to a high of 1.0976. Wednesday’s post-FOMC low was 1.0896. Against the yen, the euro recovered from a six-month low of 131.57 early in Asia today and climbed to 132.77.
However further gains in the euro are limited due to the monetary policy divergence between the Federal Reserve and the ECB. After yesterday’s hawkish statement, the Fed has put a December rate hike back into play. Meanwhile, the ECB in its latest meeting strongly hinted of more easing to come.
Sterling was mostly flat during the European session but rose sharply in late trading from a low of 1.5241 to 1.5312.
The dollar’s gains were capped after news that US GDP growth slowed in the third quarter of the year, expanding at an annualized rate of 1.5% according to the advance estimate – sharply down from the second quarter’s 3.9%. Consensus estimates were for GDP to grow by 1.6%. Meanwhile, US initial jobless claims rose marginally by 1,000 to a seasonally adjusted 260,000 for the week ending October 24. But a number below 300,000 is normally associated with a fairly healthy jobs market.
Other US data showed that US pending home sales posted a surprise drop in September. The National Association of Realtor’s reported that the index dropped 2.3% in September from the month before compared to expectations it would rise 1%.
The dollar hit a session high of 121.14 yen today. Yesterday’s post-FOMC high was 121.25 yen. The main risk for the dollar/yen pair will be Friday’s slew of Japanese data as well as the Bank of Japan policy announcement.