NEW YORK, FEBRUARY 2 (Reuters) – The euro fell against the dollar on Thursday (February 2) after the European Central Bank (ECB) raised interest rates by a widely expected 50 basis points and offered no new hawkish surprises, while the Bank of England (BofE) adopted a softer tone on inflation.
The ECB penciled in another rate hike next month and said it would then assess the path forward for its monetary policy.
The BoE also raised interest rates by 50 basis points and signaled that the tide is turning in Britain’s fight against high inflation, prompting investors to reduce bets on more aggressive policy tightening.
“The ECB was more or less in line with expectations and the Bank of England looked a little more dovish, so I think that’s helping to slow the dollar down,” said Joe Manimbo, senior market analyst at Convera in Washington. “You get the sense that central bankers are taking a little comfort from inflation moving in the right direction.”
View 2 more stories
The euro fell 0.64% to $1.0920 on the day, while sterling fell 0.68% to $1.2290.
The dollar increased by 0.61% against the basket of currencies, reaching 101.56.
The dollar index fell to a nine-month low of 100.80 on Wednesday after Federal Reserve Chairman Jerome Powell struck a more dovish tone on future monetary policy.
The U.S. central bank said it had turned a key corner in the fight against high inflation, but that “victory” would still require its benchmark overnight rate to rise further and stay high until at least 2023.
Markets responded by increasing bets that the Fed would end the hike after an additional 25 basis point hike expected in March and then cut rates in the second half of the year.
Data on Thursday showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week as the labor market remained resilient despite higher borrowing costs and rising recession fears.
U.S. worker productivity also increased faster than expected in the fourth quarter, leading to a moderate pick-up in labor cost growth.
The main US economic release this week will be Friday’s January employment report, which is expected to show employers added 185,000 jobs in the month. (USNFAR=ECI)
Currency bid prices at 9:41 am (1441 GMT)
Reporting by Karen Brettel; editing by Jonathan Oatis
Our standards. Thomson Reuters Trust Principles.