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

By David Henry and Ritvik Carvalho

NEW YORK/LONDON, April 22 (Reuters) - 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 EUR=EBS was off 0.24% to $1.2007 and the dollar index =USD 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."

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 signalled 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 and interest rates.

In cryptocurrency markets, ethernet ETC=BTSP jumped as much as 10%, while bitcoin BTC=BTSP 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 Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Dollar index

=USD

91.3550

91.1100

+0.28%

1.527%

+91.3900

+90.9980

Euro/Dollar

EUR=EBS

$1.2007

$1.2036

-0.24%

+0.00%

+$1.2070

+$1.2003

Dollar/Yen

JPY=EBS

108.0600

108.0400

+0.02%

+0.00%

+108.1900

+107.8150

Euro/Yen

EURJPY=

129.73

130.03

-0.23%

+0.00%

+130.4600

+129.7100

Dollar/Swiss

CHF=EBS

0.9186

0.9172

+0.17%

+0.00%

+0.9188

+0.9145

Sterling/Dollar

GBP=D3

$1.3835

$1.3927

-0.65%

+0.00%

+$1.3948

+$1.3825

Dollar/Canadian

CAD=D3

1.2527

1.2495

+0.28%

+0.00%

+1.2534

+1.2473

Aussie/Dollar

AUD=D3

$0.7712

$0.7753

-0.54%

+0.00%

+$0.7764

+$0.7710

Euro/Swiss

EURCHF=

1.1027

1.1033

-0.05%

+0.00%

+1.1047

+1.1015

Euro/Sterling

EURGBP=

0.8676

0.8641

+0.41%

+0.00%

+0.8702

+0.8635

NZ Dollar/Dollar

NZD=D3

$0.7164

$0.7209

-0.66%

+0.00%

+$0.7213

+$0.7162

Dollar/Norway

NOK=D3

8.3700

8.3410

+0.42%

+0.00%

+8.3770

+8.3130

Euro/Norway

EURNOK=

10.0514

10.0368

+0.15%

+0.00%

+10.0578

+10.0127

Dollar/Sweden

SEK=

8.4413

8.4015

+0.17%

+0.00%

+8.4445

+8.3861

Euro/Sweden

EURSEK=

10.1355

10.1180

+0.17%

+0.00%

+10.1365

+10.1040

World FX rateshttps://tmsnrt.rs/2RBWI5E

ECB PEPPhttps://tmsnrt.rs/2QPN8QZ

(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)

((David.Henry@thomsonreuters.com; +1-332-219-1974; Reuters Messaging: david.henry.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.