• The euro had its worst day against the dollar in 16 months on Thursday after the European Central Bank began weaning the euro zone off loose monetary policy, while U.S. Treasury yields rose slightly, hurt by weak demand at an auction of 7-year notes.
The ICE U.S. Dollar Index, which tracks the buck’s performance against six currencies, was 1% higher at 94.683, hitting its loftiest level since mid-July.
The dollar index .DXY rose 0.99 percent, with the euro EUR= down 1.35 percent to $1.1653 after the ECB said it would cut its bond purchases in half to 30 billion euros a month from January. However, it hedged its bets by extending asset purchases by nine months given low inflation.
• “Overall, the ECB’s focus on a very cautious and drawn-out tapering process that avoids pushing the euro higher was clearly more dovish than markets had been expecting,” said James Chen, head of research at Gain Capital.
• Benchmark 10-year U.S. Treasury notes US10YT=RR last fell 5/32 in price to yield 2.4609 percent, from 2.444 percent late on Wednesday.
The 30-year bond US30YT=RR last fell 10/32 in price to yield 2.9706 percent, from 2.955 percent late on Wednesday.
• A report from Politico saying that current Federal Reserve Chair Janet Yellen was out of the running for the top U.S. central bank job briefly nudged rates higher. But a White House official told Reuters: “No final decision has been made.”
• U.S. New-Home Sales Unexpectedly Jump to Highest Since 2007
U.S. purchases of new homes unexpectedly surged in September to the highest level in a decade as activity accelerated in the South after hurricanes Harvey and Irma, according to government data Wednesday.
• The number of Americans filing for unemployment benefits increased less than expected last week, suggesting the labor market continued to tighten after recent hurricane-related disruptions.
Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 233,000 for the week ended Oct. 21, the Labor Department said. Claims fell to 223,000 in the prior week, which was the lowest level since March 1973.
Last week marked the 138th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at more than a 16-1/2-year low of 4.2 percent.
• The ECB has been running its bond buying at a pace of 60 billion euros ($70 billion) per month as the central bank attempted to stoke growth and inflation among euro zone member countries. The central bank announced Thursday that the bank will now extend the program from January at a pace of 30 billion euros until at least September 2018.
• Carsten Brzeski, a chief economist at ING, said in a note that the central bank had announced a "gentle exit" from its quantitative easing (QE) program. The economist explained that the ECB wants to start the exit as cautiously as possible, without seeing the euro appreciate or bond yields increase.
• Analysts at Citi Research said in a note earlier this month that the ECB's aim is to taper the asset purchase program without causing a "market tantrum." Citi concluded that the neutral level of quantitative easing (QE) that the ECB could introduce while maintaining market calm was around 250 billion euros in total.
Citi added that the size of the monthly purchases would provide a signal to investors on whether QE is most likely to come to a hard stop or be open to continuation.
• Brent crude closed at a 27-month high on Thursday as the market focused more on comments from Saudi Arabia about ending a global supply glut instead of an unexpected increase in U.S. crude inventories and high U.S. production and exports.
Brent futures LCOc1 gained 86 cents, or 1.5 percent, to settle at $59.30 a barrel, its highest close since July 3, 2015.
U.S. West Texas Intermediate crude CLc1, meanwhile, rose 46 cents, or 0.9 percent, to settle at a six-month high of $52.64, its highest close since April 17.
• The Organization of the Petroleum Exporting Countries (OPEC), plus Russia and nine other producers, have cut oil output by about 1.8 million barrels per day (bpd) since January. The pact runs to March 2018, but they are considering extending it.
OPEC will next meet on Nov. 30 in Vienna.
• U.S. crude inventories rose by 856,000 barrels last week, U.S. Energy Information Administration (EIA) data showed on Wednesday, versus analysts’ forecast for a2.6 million-barrel draw. [EIA/S]
• The data also showed that U.S. crude production rose 1.1 million bpd last week to 9.5 million bpd after a decline due to Hurricane Nate, while U.S. oil exports hit a new record four-week average of 1.7 million bpd. [EIA/S]
Reference: Reuters, CNBC, Market Watch, Bloomberg
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