The euro rose against a mixed dollar on Thursday after the European Central Bank cut its policy rate to 2%, as expected, but hinted at a pause in its easing cycle.
With inflation now just below 2%, ECB President Christine Lagarde said the central bank was in a "good position."
Haven currencies fell as a moment of relief in U.S.-China trade relations followed a phone call between President Donald Trump and Chinese President Xi Jinping, overshadowing concerns about a weakening U.S. economy. Trump and Xi agreed to further talks with each inviting the other to their respective countries. Trump later added that talks with China were in good shape. Treasury 2-year yields climbed after briefly touching a one-month low, following data that showed weekly jobless claims rose to their highest level in seven months. Meanwhile, the U.S. trade deficit for April narrowed to its smallest level since October 2023, while Canada reported a record deficit for the month. Federal Reserve Governor Adriana Kugler supports keeping short-term borrowing costs at their current "moderately restrictive" level as long as tariffs threaten inflation and
Kansas City Fed President Jeff Schmid expressed concern that tariffs could rekindle inflation. Separately, Trump suggested he may terminate U.S. government contracts given to Elon Musk's companies, as the public feud between the two men escalates over a tax and spending bill. EUR/USD hit a six-week high of 1.1495 before paring gains. A daily inverted hammer may worry longs though the short-term trend remains bullish. A close above its upper Bollinger near the session high would be a positive development as the 1.1573 year-to-date high comes in view.
EUR/CHF rose 0.5% after ECB's hawkish cut. GBP/USD reached a new year-to-date high after the hawkish ECB cut though more favorable U.K. business surveys, as tariff worries ease, also support the pound. Further cable gains would see it challenge weekly highs near 1.3640 from February 2022. USD/JPY stayed with a narrow 142.54 to 143.99 range ahead of U.S. jobs data on Friday and upcoming U.S.-Japan trade talks. Support is seen at the June 2 close of 142.70 and June 3 low of 142.40 ahead of the May low at 142.11, whereas the cloud bottom may cap near 144.18.
The Australian dollar rose against most of its G10 peers, helped by surging metal prices.
Treasury yields were up as much as 6 basis points as the curve flattened. The 2s-10s curve was down about 2 basis points to +48.6bp.
The S&P 500 eased 0.20% as Tesla shares sunk 8%.
Oil rose 0.89% after U.S. and China agreed to more talks.
Gold fell 0.57% as trade tensions thaw while copper rose 0.89%.
Heading toward the close: EUR/USD +0.22%, USD/JPY +0.60%, GBP/USD +0.16%, AUD/USD +0.31%, DXY -0.03%, EUR/JPY -0.83%, GBP/JPY -0.81%, AUD/JPY +0.94%.(Editing by Burton Frierson Reporting by Robert Fullem)
