The Euro found support below 1.30 against the dollar during Thursday and maintained a generally firmer tone during the session as the dollar remained on the defensive. There were persistent reports of central bank buying which also helped underpin the currency.
The Euro drew support from a firm demand at the latest Spanish debt auction which helped lessen immediate fears surrounding deficit financing stresses and also encouraged a modest narrowing of yield spreads. From a longer-term perspective, there was no agreement on financial penalties for missing EU budget targets and there are still important Euro vulnerabilities.
The US growth-related data was mixed during the session. The jobless claims data again recorded a slightly stronger than expected figure with claims declining to 450,000 in the latest week from a revised 453,000 the previous week. The Philadelphia Fed survey improved from the August reading, but there was still a second successive figure below zero at -0.7 and the orders component was at the weakest for over 12 months which will maintain unease over growth trends.
The US capital account position will also be watched closely and net long-term inflows increased to US$61.2bn from US$44.4bn the previous month. Solid net flows will help offset the potential impact of a wider current account deficit for the second quarter and should curb dollar selling to some extent.
The Euro pushed to a high just above 1.31 against the dollar before stalling as central bank buying for the currency faded.
