Euro rallies broadly after ECB's Trichet announces new loan programs

The single currency rallied broadly on Thursday after ECB decided to offer new liquidity measures for the region's struggling banks. Sterling fell to a 14-month low as BoE announced an increase in its current bond purchasing program.

The single currency traded narrowly in Asia and briefly rebounded to 1.3399 in European morning due to rally in European bourses and on comments from European Commission President Jose Manuel Barroso who said 'we are proposing coordinated action by member states to recapitalise banks.' However, euro later tumbled to session low of 1.3240 as ECB decided to hold rates at 1.50%, leaving markets disappointed as they were expecting ECB to ease its stance on monetary policy in order to help the debt struck eurozone.

Later, in NY morning, euro pared its losses to 1.3434 when ECB President Jean-Claude Trichet, in his last press conference, said that the ECB would conduct 2 longer-term refinancing operations, LTROs, one with a maturity of approximately 12 months in October and the other with a maturity of approximately 13 months in December. The single currency climbed strongly in the rest of NY session to as high as 1.3451 in NY afternoon.

Versus the yen, although the greenback traded narrowly in Asia and then fell to a session low at 76.56 in European morning, the dollar rebounded to a session high of 76.84 in NY morning b4 trading sideways.

Despite cable's intra-day retreat to 1.5396, the British pound strengthened to an intra-day high at 1.5502 due to the rally of European bourses in European morning. Sterling then tumbled to a 14-month low at 1.5270 after BoE decided to keep its key rate at 0.50% but voted to buy 75 billion pounds more in assets to support the struggling British economy. However, cable later rebounded strongly in tandem with euro to 1.5459 in NY afternoon.

FTSE-100, CAC-40 and DAX rallied by 3.71%, 3.41% and 3.15% respectively. DJI closed the day at 11123.33, up by 183.38 points or 1.68%

In other news, Dutch parliament voted in favor of expanding eurozone bailout fund EFSF, with 96 out of the 150 members voting in favour.

On the data front, UK Halifax house prices fell 0.5% m/m vs an expected rise of 0.2% whilst 3m/y fell 2.3% vs forecast of a 2.1% fall. U.S. initial jobless claims were lower than expected at 401K vs forecast of 410K but still rose fm last week's 395K.

Data to be released on Friday:

Japan BoJ rate decision, Leading Indicators, UK PPI data, Germany Indus. prod'n, Canada Unemployment, Swiss Jobless rate, U.S. Non-farm payrolls, private payrolls, Unemployment rate, Avg. hourly earnings, Wholesale inventories.