EUR/USD hits fresh 5-week highs on ECB Governor comments

The euro advanced the most in 5 weeks against the US dollar on ECB Governor Mario Draghi comments, made after the policy meeting of the bank.

EUR/USD hit a session high at 1.3668 at 15:02 GMT, the highest in more than a month, after which consolidation followed at 1.3660. Support was likely to be received at December 4th low, 1.3529, while resistance was to be met at October 31st high, 1.3738.

The ECB Governor Mario Draghi, speaking after the policy meeting of the bank, said that ECBs policy will remain accommodative as long as it is needed and that benchmark interest rates will probably either remain at the current levels, or will be even lowered for an extended period of time.

The ECB Governor clarified that the Euro zone may experience a continuous period of low inflation, before the rate moves upwards to reach the 2% target. He also added that the bank held the growth expectations at -0.4% for 2013, but increased its forecast for 2014 from 1% to 1.1%.

The comments came after a widely expected move of the ECB to keep its benchmark interest rate at 0.25%.

Meanwhile, the weekly report of the US Department of Labor, showed that the Initial Jobless Claims declined to 298 000 during the week, ended on November 30th, compared to an upwardly revised 321 000 claims in the preceding week, while the median forecasts of analysts pointed that 323 000 individuals will be filing for jobless benefits. The indicator is closely watched, because a continuing increase in its value indicates rising unemployment rate and a difficult economic environment. The indicator is volatile on a week-to-week basis so the four-week moving average is also closely observed.

US preliminary Gross Domestic Product grew at a 3.6% annualized rate in the third quarter, up from initial estimate of 2.8% and the strongest since Q1 of 2012, the US Commerce Department reported today in Washington. According to the report, US growth was mainly driven by the largest increase in inventories since early 1998. Inventories increased at a $116.5 billion annualized pace in Q3, compared to $86 billion rate the preceding quarter.

The US Consumer Spending rose at a lower-than expected pace in the third quarter at a seasonally adjusted 1.4%, compared to projections of 1.5% increase and 1.5% previous value. Consumer Spending or as also referred as Personal Consumption Expenditures tracks the amount of inflation-adjusted expenditures made by households. It includes money spent for both durable goods (TVs, washing machines etc.) and non-durable goods (food). This indicator gives a short-term insight into consumer confidence and behavior. It is calculated both on a monthly and annual basis.

The Core Personal Consumption Expenditures (PCE) Price Index rose to a seasonally adjusted 1.5% in the third quarter, compared to a preliminary estimate of 1.4% and a previous reading of 1.4%. The index tracks the changes in mainly new goods’ and services’ prices, which American citizens are paying for. The Core PCE Price Index is the PCE Price Index minus the most volatile seasonal food and energy prices. It is calculated both on a monthly and annual basis.

On Friday, December 6th, the Labor Department will release the keenly anticipated data on non-farm payrolls and rate of unemployment for November. According to analysts’ projections, numbers will probably show that US employers hired 183 000 workers in November, compared to 204 000 in October. This will be the largest annual gain in payrolls since 2005. Meanwhile, the unemployment rate is projected to fall to 7.2%, the same rate as in September and the lowest since November 2008.

Elsewhere, GBP/USD reached a session low at 1.6327 at 12:47 GMT, after having risen to a 27-month high on December 2nd. Support was likely to be received at November 29th low, 1.6315, while resistance was to be encountered at December 3rd high, 1.6437.