* Euro rises above $1.18; all eyes on ECB QE signals

* Fed consensus sees four rate hikes in 2018, three hikes in
2019

* Yuan barely budges after PBOC keeps rates on hold

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes

LONDON, June 14 (Reuters) – The euro edged back above $1.18
as speculation grows the European Central Bank will signal an
end date for its vast stimulus programme at its policy meeting
on Thursday and after the dollar erased all its gains from a
slightly more hawkish Federal Reserve.

Analysts said the dollar had failed to gain after
Wednesday’s Fed meeting because investors may be able to see the
end of its rate hike cycle, while in the euro zone monetary
tightening is just beginning – a view that would be boosted if
the ECB signals an end to its huge asset purchases at the end of
2018.

Speculation that the ECB will point to an end to
quantitative easing have grown after several central bank
officials said they would debate that decision, helping the euro
to rebound in the last week.

The single currency gained 0.2 percent to $1.1811 on
Thursday, close to three-week highs.

“From a market point of view if we get a signal from the ECB
about APP (asset purchase program) ending, this will be
beneficial for the euro,” said Mathias van der Jeugt, a
strategist at KBC. “Short-term the currency could go to $1.1830,
heading to $1.20.”

As widely expected, the Fed lifted key overnight borrowing
costs by a quarter percentage point for a second time this year,
to between 1.75 and 2.00 percent.

It also ended its pledge to keep rates low enough to bolster
the economy for “some time” and signalled it would tolerate
above-target inflation at least through 2020. Policymakers
projected two more rate increases by the end of this year,
compared to one previously.

The dollar index dipped 0.3 percent to 93.391 after
briefly rising to 94.028 on Wednesday, with analysts citing the
fact that the rate rises were probably priced into the U.S.
currency and a shift in focus to the ECB.

Fresh concerns about U.S.-China trade relations were also
seen weighing on the dollar, particularly against the yen, which
is often sought in times of political tensions.

U.S. President Donald Trump will meet with his top trade
advisers on Thursday to decide whether to activate threatened
tariffs on billions of dollars in Chinese goods, a senior Trump
administration official said.

The dollar last traded at 109.965 yen, down 0.3
percent, having lost steam after hitting a three-week peak of
110.85 shortly after the Fed’s latest policy statement.

Elsewhere, the People’s Bank of China (PBOC) left borrowing
costs for interbank loans unchanged on Thursday, a surprising
decision that shrugged off the Fed’s rate increase.

“There is no urgency for China to maintain its favourable
yield differential against the United States as capital outflow
and currency stability is no longer the key concern for China at
the moment,” said Tommy Xie, economist at OCBC Bank.

“With U.S.-China trade war looming, a slightly weaker yuan
may be in China’s favour.”

The yuan’s immediate reaction to the PBOC not
raising borrowing costs was limited, with the currency roughly
flat at 6.393 yuan against the dollar.

The Australian dollar fell 0.3 percent to $0.7556, as
the Fed rate rise underlined how far away the Australian central
bank is likely to be in following.
(Additional reporting by Tomo Uetake in TOKYO; Editing by Toby
Chopra)

(c) Copyright Thomson Reuters 2018. Click For Restrictions – https://agency.reuters.com/en/copyright.html





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