By Gertrude Chavez-Dreyfuss and Chibuike Oguh
NEW YORK (Reuters) – The euro rose against the dollar on Thursday after the European Central Bank cut interest rates and ECB President Christine Lagarde tempered expectations for another cut next month, saying the bank will leave the bank’s next policy move dictated by economic data.
“We are going to decide meeting by meeting,” Lagarde said in a briefing after the ECB eased again by 25 basis points (bps) on Thursday against the backdrop of slowing inflation and economic growth.
“I am not making any commitments of any kind to you regarding that specific date and our path is not predetermined at all.”
The ECB, as widely expected, cut the deposit rate to 3.5%. However, the refinancing rate was reduced by a further 60 basis points to 3.65% as a result of a lengthy technical adjustment.
According to LSEG calculations, interest rate futures have reduced bets on an October rate cut from 10 bps just before Lagarde spoke to just over seven bps.
“Looking ahead, the path for interest rates remains uncertain,” said Yael Selfin, chief economist at KPMG in Britain.
“While there is broad consensus within the Governing Council that the restrictiveness of the policy should be relaxed, divergent views remain on the pace of cuts.”
She expects further easing in December, bringing the deposit rate down to 3.25%. If the outlook for the eurozone deteriorates further, Selfin expects ECB policymakers to increase the pace of austerity next year to a final interest rate of around 2.25%.
The euro last rose 0.37% to $1.105, but is down 0.5% so far this week.
Against the yen, the euro rose about 0.2% to 157.145 yen.
The decline of 0.41% to 101.36 was partly caused by gains in the euro, the largest component of the index.
Against the yen, the dollar fell 0.2% on the day to 142.07, having risen 0.2% so far this week.
“Lagarde has delivered roughly what was expected at the ECB,” said Steve Englander, head of Global G10 FX Research at Standard Chartered (OTC:) in New York.
“Generally speaking, the market has some appetite for risk and they are buying currencies they were previously selling – which is often an indication that risk appetite has recovered.”
Mixed U.S. economic data released Thursday reinforced expectations of a 25 basis point rate cut next week by the Federal Reserve.
Initial U.S. jobless claims rose by 2,000 to a seasonally adjusted 230,000 for the week ended September 7, in line with expectations.
US producer prices rose slightly more than expected 0.2% in August, while services costs rose, but the trend remained consistent with declining inflation. July data has been revised downwards to reflect that the producer price index was unchanged, rather than increasing 0.1% as previously reported.
Economists polled by Reuters had predicted the PPI would rise 0.1%.
“Stable producer prices should stimulate investment and that will drive the economy,” Scott Helfstein, head of investment strategy at Global X, wrote in an emailed commentary. “It’s time for the Fed to cut spending, but they may take it easy. That seems to be their business model.”
The US interest rate futures market has priced in just a 27% chance of a 50bp cut this month, down from 50% on Friday after a mixed report on US non-farm payrolls.
For 2024, interest rate futures expect a cut of 108 basis points, compared to about 113 basis points earlier this week.
Bank of Japan board member Naoki Tamura, known as a policy hawk, said Thursday that the BOJ should raise rates to at least 1% in the second half of the next fiscal year, but added that they would likely raise rates slowly and in different steps would increase. stages.
On Wednesday, fellow central bank board member Junko Nakagawa reinforced the central bank’s tightening stance, saying low real interest rates leave room for further rate hikes.
These comments have helped the yen, which is up 2.6% against the dollar so far this year.
In other currencies, sterling rose 0.48% against the dollar to $1.3106, after falling to $1.30025 in the previous session, its lowest level since August 20.
In cryptocurrencies, bitcoin gained 1.59% to $58,398.00. rose 0.29% to $2,354.60.
Currency bid prices on September 12, 2:55 PM EDT
Description RIC Last US Close Previous session Pct Change YTD Pct High bid Low bid
Dollar index 101.37 101.78 -0.39% 0.00% 101.84 101.35
Euro/Dollar 1.1059 1.1011 0.44% 0.19% $1.1063 $1.1006
Dollar/Yen 142.05 142.435 -0.26% 0.73% 142.98 141.965
Euro/yen 1.1059 156.75 0.22% 0.94% 157.51 156.54
Dollar/Swiss 0.852 0.8523 0.01% 1.28% 0.855 0.8519
Sterling/Dollar 1.3102 1.3044 0.46% 2.97% $1.3108 $1.3033
Dollar/Canadian 1.359 1.3575 0.14% 2.55% 1.3605 1.3566
Aussie/Dollar 0.6715 0.6676 0.57% -1.53% $0.6722 $0.6656
Euro/Swiss 0.9422 0.9383 0.42% 1.46% 0.9433 0.9379
Euro/British Pound 0.8439 0.8437 0.02% -2.64% 0.8455 0.8434
New Zealand dollar/dollar 0.6171 0.6138 0.56% -2.32% $0.6174 0.613
Dollar/Norway 10.7338 10.8517 -1.09% 5.9% 10.8734 10.7315
Euro/Norway 11.8709 11.9517 -0.68% 5.76% 11.974 11.866
Dollar/Sweden 10.2996 10.3741 -0.72% 2.31% 10.4036 10.2953
Euro/Sweden 11.3907 11.4333 -0.37% 2.38% 11.4519 11.3849
