April 17 (Reuters) - EUR/USD fell on Thursday after the European Central Bank cut interest rates, as expected, and cautioned that U.S. tariffs may significantly impact economic growth, increasing expectations for further policy easing.
The common currency was also hampered by a jump in oil and higher Treasury yields after a series of comments by U.S. President Donald Trump. Trump and Italian Prime Minister Giorgia Meloni expressed some optimism about resolving U.S.-European trade tensions though there is no hurry to make deals. Trump also suggested that a Ukraine minerals deal may be signed next Thursday and that he is not in a hurry to launch an attack on Iran over its nuclear program. Separately, Trump said, via social media, that Federal Reserve Chair Jerome Powell's termination "cannot come fast enough" and that rates should have been lowered already, later criticizing Fed policy making. The Wall Street Journal later reported that Trump has discussed firing Powell for months and talked about it with former Fed Governor Kevin Warsh. Warsh has advised against trying to fire Powell. Federal Reserve Bank of New York President John Williams said he sees no imminent need for a change in central bank interest rate policy as Trump administration tariffs are likely to drive up inflation, weaken growth and push up unemployment. IMF Managing Director Kristalina Georgieva said trade tensions and sweeping shifts in the global trading system will trigger downward revisions but no global recession is expected.
EUR/USD fell to 1.1336 following the ECB's rate cut and stayed lower throughout the session as it continues to adjust from overbought levels. Support is forming above the April 10 high of 1.1241, with risk reversals indicating potential upside risks beyond 1.15 barriers. A drop below the 2024 high of 1.1213 signals a deeper pullback. Markets currently anticipate cuts at the next two ECB meetings, which would bring the benchmark rate to 1.75%.
GBP/USD rose marginally though largely held to a narrow range before the Easter holidays. Support is seen near 1.32 with resistance at the year-to-date high of 1.3292. Focus will be on UK flash PMIs and comments by Bank of England officials next week.
USD/JPY edged up, underpinned by higher oil and firmer yields. The pair rose briefly after Trump said that he had a very productive meeting with Japan trade representatives on Wednesday though a series of lower highs continues to weigh on the pair. Nearby resistance is seen at the 144.55 April 4 low with solid support developing just above 141.60. A short-covering rally could ensue if oil continues to climb.
Tokyo focus will be on upcoming nationwide CPI numbers Friday.
Treasury yields were up 1 to 6 basis points as the curve steepened. The 2s-10s curve was up about 3 basis points to +50.3bp.
The S&P 500 rose 0.25% in modest pre-holiday turnover.
Oil jumped 3.25% on trade deal hopes.
Gold fell 0.90% and copper dropped 1.5%.
Heading toward the close: EUR/USD -0.25%, USD/JPY +0.40%, GBP/USD +0.22%, AUD/USD +0.28%, DXY +0.01%, EUR/JPY +0.16%, GBP/JPY +0.58%, AUD/JPY +0.69%.(Editing by Burton Frierson Reporting by Robert Fullem)
