Euro weaker after report ECB chief to leave; dollar higher after data, Fed minutes
An employee counts Euro bills at a money exchange office in central Cairo, Egypt, March 20, 2019. REUTERS/Mohamed Abd El Ghany
NEW YORK, Feb 18 : The euro stumbled on Wednesday after a report that European Central Bank (ECB) President Christine Lagarde planned to step down early, while the dollar strengthened further following a batch of economic data and the minutes from the Federal Reserve's January meeting.
The Financial Times reported Lagarde plans to leave her job early, ahead of next year's French presidential election, to give outgoing French leader Emmanuel Macron a say in picking her successor.
However, the ECB said that Lagarde had not yet made a decision on the end of her term and Executive Board Member Piero Cipollone said he had “no news” about a resignation before the end of her term.
"There is some discussion about who the next ECB president is going to be but I'm not sure that it's going to be something that markets are going to be overly focused on," said James Lord, global head of FX & EM strategy at Morgan Stanley.
"Currency markets are going to be mostly focused on the near-term data, the near-term monetary policy outlook and so, the news about Lagarde may then not be market moving."
The dollar strengthened after a flurry of U.S. economic data was stronger than anticipated, likely driven by an AI investment boom.
The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.6 per cent, above the 0.4 per cent forecast of economists polled by Reuters.
In addition, the Federal Reserve said manufacturing output rose 0.6 per cent last month, the largest gain since February 2025, after being unchanged in December, topping the 0.4 per cent estimate.
The dollar index, which measures the greenback against a basket of currencies, rose 0.6 per cent to 97.71, with the euro down 0.57 per cent at $1.1786.
The greenback was on track for its third straight advance and biggest daily percentage gain since January 30.
Sterling weakened 0.52 per cent to $1.3499 after official figures showed Britain's annual rate of consumer price inflation fell to 3.0 per cent in January, in line with the estimate of economists polled by Reuters, from 3.4 per cent in December.
FED MINUTES, GEOPOLITICS IN FOCUS
The minutes from the Fed's most recent policy meeting showed policymakers were in near-unanimous agreement to keep interest rates on hold, but remained split over the next steps, with "several" of them open to rate hikes if inflation remains elevated, while others were willing to cut rates further if inflation retreats.
Markets are not pricing in more than a 50 per cent chance of a cut of at least 25 basis points from the Fed until its June meeting, according to CME's FedWatch Tool, the first after current Chair Jerome Powell's term ends.
Focus also remains on geopolitics, with Iran and the U.S. reaching an understanding on the main "guiding principles" in a second round of indirect talks over their nuclear dispute on Tuesday, although a deal is not imminent, Iranian Foreign Minister Abbas Araqchi said.
YEN SOFT, KIWI SLUMPS
Against the Japanese yen, the dollar strengthened 0.98 per cent to 154.78.
The Trump administration announced three projects valued at $36 billion to be financed by Japan, the first of some $550 billion in projects Tokyo agreed to undertake in order to lower U.S. tariffs.
Elsewhere, the kiwi weakened 1.39 per cent versus the greenback to $0.5961, its biggest drop since September 19 after the Reserve Bank of New Zealand held its key rate unchanged at 2.25 per cent in its first meeting chaired by Governor Anna Breman, and said policy would likely stay accommodative for some time.
"The statement largely downplayed most of the recent improvement in the domestic data, with the recovery in the growth data seen as still being at an early stage, and continued confidence in headline inflation returning to target after recent upside surprises," said analysts at Goldman Sachs in a note.
