FOREX-Euro falls after ECB signals steady rates through 2019 summer

Reuters

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    * Fed consensus sees four rate hikes in 2018, three hikes in
2019
    * Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

    By Tommy Wilkes
    LONDON, June 14 (Reuters) - The euro slumped more than half
a percent on Thursday after the European Central Bank said it
would keep interest rates at record lows through the summer of
2019 and signaled it would   end its unprecedented bond purchase
scheme by end-2018.
    After initially rallying nearly half a percent higher to
$1.1853, the single currency  EUR=EBS  fell to the day's lows at
$1.1718 -- marking an intraday range of one percent as some
analysts were disappointed about the timing of its rate hike.
    Investors now price just a 30 percent chance of a 10 basis
point rate hike by July 2019, compared with a roughly 80 percent
chance earlier in the day.  ECBWATCH 
    "The hawks had been guiding for a June hike before the
meeting and given the clear guidance the ECB gave today on
interest rates, it had to be priced out," said AFS Group analyst
Arne Petimezas based in Amsterdam. 
    Signalling the move would not mean rapid policy tightening
in the coming months, the ECB also said that interest rates
would stay at record lows at least through the summer of 2019,
suggesting protracted support for the economy, even if at a
lower level.  urn:newsml:reuters.com:*:nL8N1TG0UZ    
    "It doesn't seem like we're at the stage where the hawks are
on top of things." 
    The euro's drop pulled the dollar higher with the index up
0.1 percent on the day  .DXY  at 93.81.
    In the London session, the dollar was trading broadly weaker
before the ECB decision in the wake of the Fed's rate hikes,
with future rate rises now priced in with a growing view that
U.S. economic strength could be nearing its peak, analysts said.
    As expected, the Fed lifted its key overnight borrowing
costs by a quarter percentage point for a second time this year,
to between 1.75 and 2.00 percent.  urn:newsml:reuters.com:*:nTLADHEE2K  

 (Additional reporting by Dhara Ranasinghe and Saikat
Chatterjee;
Editing by Toby Chopra and Susan Fenton)
 ((thomas.wilkes@thomsonreuters.com))

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