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Dollar Rallies Versus Yen on Inflation Prospects; European Stocks Rebound

Here are the latest developments in global markets:

FOREX: Dollar/yen stretched towards a one-week high of 109.74 (+0.51%) during early European trading after the FOMC statement highlighted yesterday that the US inflation is expected to "move up this year". However, the dollar index inched down to 89.00, remaining near 3-year lows, on the face of a strengthening euro and pound. Euro/dollar crawled up to 1.2450 (+0.14%) amid prospects that the ECB will reduce monetary stimulus this year and pound/dollar was on track to post gains for the third consecutive day, surging to 1.4273 (+0.27%). On Tuesday, the BOE Governor, Mark Carney, acknowledged the strength of the economy and said that the focus was turning to inflation. Aussie/dollar dipped into further losses towards a one-week trough of 0.7992, harmed by worse-than-expected readings on Australian building approvals.

STOCKS: Encouraging earnings results helped European stocks to erase yesterday’s losses on Thursday. The benchmark European STOXX 600 was up by 0.50% at 1000 GMT, underpinned by gains in the tech, utility and financial sectors, while the blue-chip Euro STOXX 50 increased by 0.40%, with energy shares leading the index’s gains. The Italian FTSE MIB jumped by 1.0%, the French CAC 40 rose by 0.46% and the German DAX 30 moved up by 0.38%. The British FTSE 100 edged up by 0.06%.

COMMODITIES: Oil prices rallied after a survey noted that OPEC’s commitment to curb supply remains in place, despite increases in US production. WTI crude surged to an intraday high of $65.42/barrel (+0.96%) and Brent hit a top at $69.67/barrel (+ 1.06%). Gold slipped to a low of $1338/ounce (-0.50%).

Day ahead: US initial Jobless claims & ISM Manufacturing PMI eyed

For the remainder of the day, the calendar will feature US data, with attention turning mainly to initial jobless claims (1330 GMT) and ISM manufacturing PMI readings (1500 GMT).

In the week ending January 26, analysts expect that 238,000 people applied for unemployment benefits for the first time compared to 233,000 seen in the preceding week, reflecting a strong labor market as long as the measure continues to remain below the threshold of 300,000 that is linked to a strong jobs market.

The Institute for Supply Management (ISM) will release stats on manufacturing activity for the month of January. The index is expected to inch down by 0.9 points to 58.8, though, any print above 50 would indicate that the manufacturing industry is generally expanding.

Other releases that might draw some attention out of the US are Q4 2017 preliminary data on labor costs and productivity (1330 GMT), Markit’s final reading on January manufacturing PMI (1445 GMT), December construction spending figures (1500 GMT) and January’s total vehicle sales (2030 GMT).

On the equities front, corporate giants Alibaba, Amazon, Apple and Google parent Alphabet will be among companies releasing quarterly earnings reports on Thursday.

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