Forexpros – The dollar traded lower against most major global currencies on Thursday as expectations continued to build from previous sessions that the Federal Reserve will move to stimulate the U.S. economy with monetary easing tools.
Talk the European Central Bank will roll out similar measures also fueled demand for risk, which further pushed the greenback down.
Meanwhile, soft Chinese inflation figures fueled more demand for risk as well.
In Asian trading on Thursday, EUR/USD was up 0.13% at 1.2381.
The Federal Reserve will likely announce plans to resume its quantitative easing program in the coming weeks.
Under quantitative easing, the Fed buys assets from banks like Treasury holdings or mortgage-backed securities, pumping the economy full of liquidity to push down interest rates, weakening the dollar in the process.
The European Central Bank is expected to announce similar measures, namely sovereign debt purchases in the open market, which sparked demand for risk around the world.
Weak indicators continued to hit the wire in Europe.
German industrial production fell 0.9% in June, slightly worse than analysts’ calls for a decline of 0.8%, and down from an upwardly revised 1.7% gain in May.
The data came on the heels of more bad news out of Germany.
German factory orders fell 1.7% in June, well above expectations for a 1.0% decline.
Meanwhile, Italy reported that its gross domestic product contracted by 0.7% in the second quarter, worse than expectations for a 0.6% contraction.
Furthermore a Standard and Poor’s decision to slap a negative outlook on Greece coupled with a warning that Athens could miss financial targets set by its international lenders — which would increase the likelihood of a default — also stirred talk of ECB intervention.
Greek Finance Minister Yannis Stournaras has the said the government still needs to present a game plan to creditors outlining ways to shave EUR4 billion off spending as part of a broader commitment to bring 2013-14 budget cuts to EUR11.5 billion.
Meanwhile in China, inflation rates hit a 30-month low in July.
The country’s consumer price index rose 1.8% on year in July, down from a 2.2% gain in June.
Analysts were expecting the index to climb a tad lower by 1.7%.
The numbers sparked talk Beijing can loosen monetary policy as well, which was bullish for Asian stocks and bearish for the dollar.
The Bank of England, meanwhile, cut its growth forecast to zero this year but has no plans to cut interest rates or roll out stimulus measures, the bank’s governor Mervyn King said.
The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.14% at 1.5678.
The dollar was up against the yen, with USD/JPY trading up 0.10% at 78.51, and down against the Swiss franc, with USD/CHF trading down 0.12% at 0.9702.
The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.01% at 0.9942, AUD/USD up 0.23% at 1.0594 and NZD/USD down 0.10% at 0.8139.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.12% at 82.31.
Later Thursday, the U.S. is to publish its weekly report on initial jobless claims and data on the trade balance.
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