By Chuck Mikolajczak
NEW YORK (Reuters) -The euro fell on Thursday after the European Central Bank kept interest rates steady, as widely expected, while the euro rose after stronger-than-expected data on the U.S. labor market and manufacturing sector.
The ECB provided no insight into its next move, arguing that domestic price pressures remain high and inflation will be above its target well into next year, leaving it to the market to react to President Christine Lagarde’s comments decipher for clues about the central bank’s next move.
“Compared to the Fed, the ECB may have been the first to cut spending, but they won’t be the fastest. When the ECB was the last to make cuts, it was a cautious cut, now every meeting becomes a live meeting where the data will appear. dictate every step,” says Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
“If the Fed cuts, it will be a confident cut where even a month or two of bad numbers won’t deter them. It’s annoying that the Fed is waiting so long to make cuts, but ultimately it will provide a clearer path.”
The euro fell 0.37% to $1.0897, a day after hitting a four-month high of $1.0947. It was poised for the biggest daily drop in a month.
On the US front, weekly initial jobless claims rose by 20,000 to 243,000, above 230,000 estimates from economists polled by Reuters, although this is not considered a notable shift in the labor market due to seasonal factors.
In addition, manufacturing activity in the US Mid-Atlantic region grew stronger than expected in July, boosted by a strong increase in new orders.
The dollar index, which measures the greenback against a basket of currencies, rose 0.49% at 104.18 for the day after hitting a four-month low at 103.64 and was on track for the biggest daily percentage gain since June 13.
The Federal Reserve is expected to make its next policy announcement in late July. Markets expect only a slim chance of a cut of at least 25 basis points (bps), while they almost fully priced in a cut at the September meeting, CME’s FedWatch Tool shows.
Fed officials expected Thursday include Bank of San Francisco President Mary Daly and Governor Michelle Bowman.
Against the Japanese yen, the dollar strengthened 0.7% to 157.26, recovering from a decline in the previous session that sparked speculation of intervention by the Bank of Japan. Analysts also attributed the weakness to comments by US presidential candidate Donald Trump about the strength of the dollar.
Sterling weakened 0.5% to $1.2945 after British data showed wages rising at a slower pace, but was still strong enough to keep doubts about an upcoming Bank of England rate cut intact.
In cryptocurrencies, bitcoin fell 1.70% to $63,428.00. fell 0.62% to $3,394.90.
