By Gertrude Chavez-Dreyfus and Chibuike Oguh
NEW YORK (Reuters) – The euro rose against the dollar on Thursday after the European Central Bank cut interest rates and its president, Christine Lagarde, tempered expectations for another cut next month, saying the bank would let economic data dictate the next policy move.
“We will decide meeting by meeting,” Lagarde said at a news briefing after the European Central Bank cut interest rates again on Thursday by 25 basis points amid slowing inflation and economic growth.
“I give you no commitment of any kind regarding this specific date and our path is not predetermined at all.”
The European Central Bank cut its deposit rate to 3.5%, as widely expected. However, the refinancing rate was cut by a much larger 60 basis points to 3.65% in a long-awaited technical adjustment.
According to London Stock Exchange calculations, interest rate futures have cut bets on an October rate cut to just over 7 basis points from 10 basis points just before Lagarde’s comments.
“Looking ahead, the path of interest rates remains uncertain,” said Yael Selfin, chief economist at KPMG in the UK.
“While there is broad consensus on the Board that policy restrictions need to be eased, divergent views remain on the pace of cuts.”
Silvina expects further easing in December, which would lower the deposit rate to 3.25%. If the eurozone outlook weakens further, Silvina expects ECB policymakers to step up the pace of cuts next year toward a final rate of around 2.25%.
The euro was last up 0.37% at $1.105, but is down 0.5% so far this week.
The euro rose against the yen by about 0.2% to 157.145 yen.
The main index of the European market fell on Tuesday by 0.41% to 101.36, driven in part by gains in the euro, the largest component of the index.
The dollar fell against the yen by 0.2% during the day to 142.07 yen, after rising by 0.2% so far this week.
“Lagarde has kind of delivered what was expected at the ECB,” said Steve Englander, head of G10 global currency research at Standard Chartered in New York.
“In general, the market has some risk appetite and they are buying back the currencies they sold before – which often indicates a return of risk appetite.”
Mixed U.S. economic data released on Thursday boosted expectations of a 25 basis point interest rate cut by the Federal Reserve next week.
Initial claims for unemployment benefits in the United States rose by 2,000 to a seasonally adjusted 230,000 for the week ended September 7, in line with expectations.
U.S. producer prices rose 0.2% in August, slightly more than expected, as service costs rose but the trend remained consistent with a decline in inflation. Data for July was revised down to show the producer price index holding steady instead of rising 0.1% as previously reported.
Economists polled by Reuters had forecast the producer price index rising 0.1%.
“Stable producer prices should stimulate investment, which should drive the economy,” Scott Helfstein, head of investment strategy at GlobalX, wrote in emailed comments. “It’s time for the Fed to cut rates, but it can do so slowly and steadily. That seems to be its business model.”
The U.S. interest rate futures market has priced in just 27% odds of a 50 basis point rate cut this month, down from 50% on Friday after a mixed U.S. nonfarm payrolls report.
For 2024, interest rates are expected to be cut by 108 basis points, down from about 113 basis points earlier this week.
Bank of Japan board member Naoki Tamura, known as a monetary policy hawk, said on Thursday that the central bank should raise interest rates to at least 1% in the second half of the next fiscal year, but added that it would likely raise rates slowly and in stages.
On Wednesday, Bank of Japan board member Junko Nakagawa reinforced the central bank’s hawkish bias by saying low real interest rates leave room for further rate hikes.
The comments helped the yen, which has risen 2.6% so far this year against the dollar.
In other currencies, the pound 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 rose 1.59% to $58,398.00. The cryptocurrency rose 0.29% to $2,354.60.
Currency Order Prices on September 12 02:55 PM EST
Description RIC Last US Close Previous Session Percentage Change To Date Percentage Highest Bid Lowest Bid
Dollar Index 101.37 101.78 -0.39% 0.00% 101.84 101.35
EUR/USD 1.1059 1.1011 0.44% 0.19% $1.1063 $1.1006
USD/JPY 142.05 142.435 -0.26% 0.73% 142.98 141.965
EUR/JPY 1.1059 156.75 0.22% 0.94% 157.51 156.54
USD/CHF 0.852 0.8523 0.01% 1.28% 0.855 0.8519
GBP/USD 1.3102 1.3044 0.46% 2.97% $1.3108 $1.3033
USD/CAD 1.359 1.3575 0.14% 2.55% 1.3605 1.3566
AUD/USD 0.6715 0.6676 0.57% -1.53% $0.6722 $0.6656
EUR/CHF 0.9422 0.9383 0.42% 1.46% 0.9433 0.9379
EUR/GBP 0.8439 0.8437 0.02% -2.64% 0.8455 0.8434
NZD/USD 0.6171 0.6138 0.56% -2.32% 0.6174 0.613
USD/NOR 10.7338 10.8517 -1.09% 5.9% 10.8734 10.7315
EUR/NOR 11.8709 11.9517 -0.68% 5.76% 11.974 11.866
USD/SEK 10.2996 10.3741 -0.72% 2.31% 10.4036 10.2953
EUR/SED 11.3907 11.4333 -0.37% 2.38% 11.4519 11.3849