The pair fell sharply on Wednesday trading, for the third straight session, as the improvement in the sentiment after the IMF plan to expand its lending capacity by $500 billion and successful European debt auctions damped demand on the dollar.
The IMF is looking forward to expanding its lending capacity to $885 billion from the current $385 billion to protect the global economy from the negative consequences of the European debt crisis, according to an official at a Group of 20 nation.
The announcement provided optimism in markets, especially after a successful bond selling by both Germany and Portugal.
Germany managed to sell two-year bonds at lower yields and stronger demand, where the government sold 3.44 billion euros of 2-year notes with an average yield of 0.17% from 0.29% in the prior auction, while the bid-to-cover ratio improved to 2.2 times compared with the previous 1.43 times recorded December’s auction.
Portugal also auctioned 1.25 billion euros, 754 million euros and 496 million euros of 11-, 6- and 3-month bonds respectively, where the yield of the six-month bills retreated to 4.74% from 5.25% in the prior auction.
Moreover, Greece will resume talks with private sector debt holders on Wednesday after the halt of the negotiations on January 13, to reach an agreement over the size of losses to be bared by creditors to avert a possible default as early as in March.
On the other hand, the Swiss franc took advantage of the dollar’s drop and gained another support from the ZEW survey which showed that the index rose to the highest level since seven months as it surged to -50.1 in January from -72.0 last month.
On Thursday, the U.S. economy will release initial jobless claims for the week ended Dec. 24 and continuing claims for the week ended Dec. 16, where they will be available at 13:30 GMT. At 14:45 GMT, Chicago purchasing manager is estimated to retreat to 60.2 in Dec. from the previous 62.6. 15 minutes later, pending home sales for Nov. will signal 1.8% advance compared with the preceding 10.4% rise.
The U.S. will start the data at 13:30 GMT with the Inflation Report. The CPI index is expected with 0.1% rise on the month after holding unchanged the previous month and on the year to slow to 3.1% after 3.4%. Excluding food and energy the index is expected with 0.1% rise on the month after 0.2% gain and on the year to hold at 2.2%.
December Housing Starts index is also due the same time and expected flat at 685,000 while Building Permits are expected with 0.7% drop to 675,000 from 681,000.
As for the Jobless Claims for the week ending in January 14 it is also due at 13:30 GMT as usual after last week they rose 24,000 to 399,000 last week.
As for the Philadelphia Fed Index for January the index is due 15:00 GMT and expected to improve slightly to 11.0 from 10.3.
The data will affect the pair’s movement due to its relevance, yet the pair will probably be more affected by the general sentiment which will focus on an auction from Spain.