iFOREX Daily Analysis : October 21, 2016

 | Oct 21, 2016 05:11AM ET

The dollar bounced back to a fresh seven-month high against the other majors currencies on Thursday, after slipping briefly, as markets digested comments by European Central Bank president Mario Draghi, as well as a string of mixed U.S. data.

The U.S. National Association of Realtors reported on Thursday that existing home sales increased by 3.2% in September, to 5.47 million units, from 5.30 million in August, while the consensus forecast was for a 0.4% advance to 5.35 million units. The data came after the U.S. Department of Labor said initial jobless claims increased by 13,000 in the week ending October 15 to 260,000, from the previous week’s total of 247,000, while analysts had expected jobless claims to rise by 4,000 to 250,000 last week. In addition, the Philadelphia Federal Reserve said its business conditions index came in at 9.7 this month, down from 12.8 in September, while economists had expected a reading of 5.3 this month.

Elsewhere, the ECB left interest rates unchanged at record lows of zero and held its quantitative easing program unchanged at €80 billion per month, and, in a subsequent press conference, ECB President Mario Draghi said the central bank would wait for updated economic forecasts in December to make a decision, and that it had not discussed either tapering the size of its asset purchase program, or extending the horizon of the purchases.

Today the U.K. is to release data on public sector borrowing, while Canada is to round up the week with reports on retail sales and inflation.

EUR/USD

The euro fell to four-month lows against the dollar in volatile trade on Thursday, after European Central Bank President Mario Draghi indicated that an adjustment to the banks stimulus program could come in December.

Earlier Thursday, the ECB left interest rates across the euro zone unchanged at record lows of zero and kept the deposit facility rate at -0.4%. The single currency initially popped higher after Draghi said the ECB did not discuss a tapering its asset purchase program, or the possible horizon at which stimulus might end at its meeting.

But the euro quickly turned lower after Draghi indicated that an adjustment to the bank’s stimulus program could come in December, because he added that the euro zone economy is continuing to post a “moderate recovery, and a gradual rise in inflation” and, furthermore, he said that also the euro area continued to show “resilience” to economic and political uncertainty, in the aftermath of the June 23 vote by Britain to exit the European Union.