Euro and U.S. dollar waffle as markets weigh ECB policy talk

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NEW YORK/LONDON — Major currencies

gyrated between modest gains and losses on Thursday as markets

tried to digest European Central Bank comments on interest rate

policy amid new evidence in the United States of a stronger

economic recovery.

The euro edged higher, toyed with a bigger gain and then

fell back after the European Central kept its interest rate

policy intact and left questions about how it will withdraw

stimulus when the economy recovers.

The euro was up on the day about 0.1% against the U.S.

dollar when the central bank posted its statement, and briefly

doubled as ECB chief Christine Lagarde spoke afterward citing

“signs of improvement” under clouds of economic uncertainty,

before slipping back.

At mid-morning in New York the euro was off 0.24%

to $1.2007 and the dollar index against major currencies

was up 0.28% to 91.355.

Axel Merk, chief investment officer at Merk Investments in

Palo Alto, California, said markets vacillated over what Lagarde

was revealing about the timing of interest rate hikes when she

said that the ECB would like to pace its moves with those of the

U.S. central bank but that two economies have different

inflation trajectories.

In the end, Merk said, “there was no big substance there.”

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The back-and-forth of the currencies on Thursday was another

example of how markets have been preoccupied with sorting out

how quickly different economies will rebound from the pandemic

and how their interest rates will fluctuate.

On Wednesday the Canadian dollar rose sharply after the Bank

of Canada signaled rate hikes next year and said it was pulling

back on asset purchases. The announcement marked the first Group

of Seven central bank to move towards withdrawing stimulus.

Now markets are looking toward next week’s meeting of the

U.S. Federal Reserve and possible comments about how it views

future changes in its easy monetary policy.

After the ECB comments, euro zone bond yields edged higher

while yields on 10-year U.S. Treasuries were little changed at

1.56% despite a report from the government that U.S. weekly

jobless claims declined further, strengthening expectations for

blockbuster U.S. job growth in April.

Sentiment toward the dollar has weakened much of this month

after a March spike in Treasury yields reversed course. But

some analysts say the outlook over the longer term remains

positive due to a strong U.S. economy and more coronavirus

vaccinations.

“Looking ahead, we see a strategically high risk that U.S.

real rates will make a comeback,” said Lars Sparresø Merklin,

senior analyst at Danske Bank.

Merk said, “Ultimately what matters is the progress with the

pandemic” and what that means for a global recovery, inflation

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and interest rates.

In cryptocurrency markets, ethernet jumped as

much as 10%, while bitcoin rose 3% to $55,400 at 1235

GMT.

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Currency bid prices at 10:24 AM (1424 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 91.3550 91.1100 +0.28% 1.527% +91.3900 +90.9980

Euro/Dollar $1.2007 $1.2036 -0.24% +0.00% +$1.2070 +$1.2003

Dollar/Yen 108.0600 108.0400 +0.02% +0.00% +108.1900 +107.8150

Euro/Yen 129.73 130.03 -0.23% +0.00% +130.4600 +129.7100

Dollar/Swiss 0.9186 0.9172 +0.17% +0.00% +0.9188 +0.9145

Sterling/Dollar $1.3835 $1.3927 -0.65% +0.00% +$1.3948 +$1.3825

Dollar/Canadian 1.2527 1.2495 +0.28% +0.00% +1.2534 +1.2473

Aussie/Dollar $0.7712 $0.7753 -0.54% +0.00% +$0.7764 +$0.7710

Euro/Swiss 1.1027 1.1033 -0.05% +0.00% +1.1047 +1.1015

Euro/Sterling 0.8676 0.8641 +0.41% +0.00% +0.8702 +0.8635

NZ $0.7164 $0.7209 -0.66% +0.00% +$0.7213 +$0.7162

Dollar/Dollar

Dollar/Norway 8.3700 8.3410 +0.42% +0.00% +8.3770 +8.3130

Euro/Norway 10.0514 10.0368 +0.15% +0.00% +10.0578 +10.0127

Dollar/Sweden 8.4413 8.4015 +0.17% +0.00% +8.4445 +8.3861

Euro/Sweden 10.1355 10.1180 +0.17% +0.00% +10.1365 +10.1040

(Reporting by David Henry in New York and Ritvik Carvalho in

London; additional reporting by Stanley White in Tokyo; editing

by Larry King, William Maclean)