Euro gains after ECB rate cut as Lagarde pushes back on October ease
ECB cuts rates by 25 bps
ECB's Lagarde does not commit to October rate move
U.S. data douses hopes for big Fed cut
Updates as of 1439 ET
By Gertrude Chavez-Dreyfuss and Chibuike Oguh
NEW YORK, Sept 12 (Reuters) -The euro rose against the dollar on Thursday after the EuropeanCentral Bank lowered interest rates and ECB presidentChristine Lagarde dampened expectations for another cut next month, sayingthe bank will let economic data dictate the next policy move.
"We are going to decide meeting by meeting," Lagarde said in a briefing after the ECB easedagain on Thursday by 25 basis points (bps) amid slowing inflation and economic growth.
"I'm not giving you any commitment of any kind as far as that particular date is concerned and our path is not predetermined at all."
The ECB lowered its deposit rate to 3.5%, as widely expected. The refinancing rate, however, was cut by a much bigger 60 bps to 3.65% in a long-flagged technical adjustment.
Rate futures have pared back bets of an October rate cut to just more than seven bps from 10 bps just before Lagarde spoke, according to LSEG calculations.
"Looking ahead, the path for interest rates remains uncertain," said Yael Selfin, chief economist at KPMG in the UK.
"While there is widespread consensus on the Governing Council that policy restrictiveness should be eased, divergent views remain around the pace of cuts."
She expects further easing in December that would take the deposit rate down to 3.25%. If the euro zone outlook weakens further, Selfin sees ECB policymakers increasing the pace of cuts next year towards a terminal rate of around 2.25%.
The euro was last up 0.37%at $1.105 EUR=EBS, but down 0.5% so far this week.
Against the yen, the euro rose about 0.2% to 157.145yen EURJPY=EBS.
The U.S.dollar index fell 0.41%to 101.36=USD, driven partly by gains in the euro, the largest component of the index.
Against the yen, the dollar eased 0.2%on the day to 142.07JPY=EBS, after gaining 0.2% so far this week.
"Lagarde kind of delivered what was expected at the ECB," said Steve Englander, head of Global G10 FX Research at Standard Chartered in New York.
"Overall, the market has a bit of risk appetite and they're buying currencies that they sold before - which often is an indication that risk appetite is restored."
Mixed U.S. economic data released on Thursday cemented expectations of a 25-bps cut next week by the Federal Reserve.
U.S. initial jobless claims rose 2,000 to a seasonally adjusted 230,000 for the week ended Sept. 7, in line with expectations.
U.S. August producerprices increased a slightly-more-than-expected 0.2% as services costs rose, but the trend remained consistent with ebbing inflation. Data for July was revised lower to show the producer price index unchanged instead of edging up 0.1% as previously reported.
Economists polled by Reuters had forecast the PPI gaining 0.1%.
"Stable producer prices should drive investment and that will drive the economy," wrote Scott Helfstein, head of investment strategy at Global X in emailed comments. "It is time for the Fed to cut, but they may well take it slow and steady. That seems to be their operating model."
The U.S. rate futures market has priced just a 27% chance of a 50-bp cut this month, down from as high as 50% on Friday following a mixed U.S. nonfarm payrolls report.
For 2024, rate futures expect 108 bps cuts, down from about 113 bps earlier this week.
Bank of Japan board member Naoki Tamura, known as a policy hawk, said on Thursday the BOJ must raise rates to at least 1% as soon as the second half of the next fiscal year but added that it would likely raise rates slowly and in several stages.
On Wednesday, fellow BOJ board member Junko Nakagawa reinforced the central bank's tightening bias by saying low real rates leave room for further rate hikes.
Those comments have helped the yen, which has gained 2.6% so far this year versus the dollar JPYUSD=R.
In other currencies, sterling GBP=D3 rose 0.48%versus the greenback to $1.3106after dipping to $1.30025 in the previous session, its lowest since Aug. 20.
In cryptocurrencies, bitcoin BTC= gained 1.59% at $58,398.00. Ethereum ETH= rose 0.29% at $2,354.60.
Currency bid prices at 12 September 02:55 p.m. EDT |
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid |
Dollar index =USD 101.37 101.78 -0.39% 0.00% 101.84 101.35 |
Euro/Dollar EUR=EBS 1.1059 1.1011 0.44% 0.19% $1.1063 $1.1006 |
Dollar/Yen JPY=D3142.05 142.435 -0.26% 0.73% 142.98 141.965 |
Euro/Yen EURJPY= 1.1059 156.75 0.22% 0.94% 157.51 156.54 |
Dollar/Swiss CHF=EBS 0.852 0.8523 0.01% 1.28% 0.855 0.8519 |
Sterling/Dollar GBP=D31.3102 1.3044 0.46% 2.97% $1.3108 $1.3033 |
Dollar/Canadian CAD=D31.359 1.3575 0.14% 2.55% 1.3605 1.3566 |
Aussie/Dollar AUD=D30.6715 0.6676 0.57% -1.53% $0.6722 $0.6656 |
Euro/Swiss EURCHF= 0.9422 0.9383 0.42% 1.46% 0.9433 0.9379 |
Euro/Sterling EURGBP= 0.8439 0.8437 0.02% -2.64% 0.8455 0.8434 |
NZ Dollar/Dollar NZD=D30.6171 0.6138 0.56% -2.32% $0.6174 0.613 |
Dollar/Norway NOK= 10.7338 10.8517 -1.09% 5.9% 10.8734 10.7315 |
Euro/Norway EURNOK= 11.8709 11.9517 -0.68% 5.76% 11.974 11.866 |
Dollar/Sweden SEK= 10.2996 10.3741 -0.72% 2.31% 10.4036 10.2953 |
Euro/Sweden EURSEK= 11.3907 11.4333 -0.37% 2.38% 11.4519 11.3849 |
World FX rates https://tmsnrt.rs/2RBWI5E
Reporting by Gertrude Chavez-Dreyfuss in New York; additional reporting by Chibuike Oguh in New York. Editing by Alden Bentley, Shri Navaratnam, Mark Potter, Chizu Nomiyama and Richard Chang
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