Euro Dips as ECB Holds Rates Steady; Dollar Index Advances

The euro fell after the European Central Bank (ECB) held rates steady, lacking clarity on future moves. Meanwhile, the dollar index rose with positive U.S. labor and manufacturing data. As the Federal Reserve prepares for its next policy announcement, the market is keenly watching both ECB and Fed actions for future economic directions.

The euro tumbled on Thursday following the European Central Bank's (ECB) decision to maintain existing interest rates, as widely anticipated. Concurrently, the dollar index climbed, bolstered by strong U.S. labor market and manufacturing data.

The ECB provided no clear indication regarding future rate changes, with President Christine Lagarde stating domestic price pressures remain elevated and inflation is expected to exceed targets into next year. This leaves market analysts to infer the central bank's next steps from Lagarde's comments.

Brian Jacobsen, chief economist at Annex Wealth Management, remarked, "Compared to the Fed, the ECB may have been the first to cut, but they won't be the fastest. Every upcoming ECB meeting will be a live one, heavily dictated by data." Jacobsen also noted that the Federal Reserve's cutting strategy, although delayed, will ultimately result in a clearer economic trajectory.

The euro declined 0.26% to $1.0909, pulling back from a four-month high of $1.0947 reached in the prior session. On the U.S. side, initial jobless claims rose by 20,000 to 243,000, topping the 230,000 estimate, though this rise is deemed inconsequential due to seasonal factors.

A marker of U.S. Mid-Atlantic manufacturing activity showed unexpected growth in July, driven by increased new orders. The dollar index rose 0.27% to 103.95 after hitting a four-month low of 103.64 on Wednesday. The Federal Reserve's next policy announcement, scheduled for late July, is anticipated to include a slight chance of a rate cut, with markets almost fully pricing in a September cut, as indicated by the CME's FedWatch Tool.

Additional Fed comments are expected from San Francisco Fed President Mary Daly, Dallas Fed President Lorie Logan, and Governor Michelle Bowman on Thursday. Meanwhile, the dollar rose against the Japanese yen by 0.2% to 156.48, recovering from a previous dip sparked by speculations of Japanese intervention and comments from U.S. presidential candidate Donald Trump about the dollar's strength. The British pound weakened by 0.25% to $1.2975 following slower wage growth data from the UK, despite lingering doubts about an imminent rate cut from the Bank of England.

In the cryptocurrency market, bitcoin increased by 0.21% to $64,655.00, while Ethereum climbed 1.69% to $3473.98.

(With inputs from agencies.)