LONDON, May 8 (Reuters) - The euro was little changed versus the dollar, while bunds barely moved on Thursday after the European Central bank left interest rates at 4 percent, as expected, turning attention to the post-verdict briefing.
Markets will closely scrutinise ECB President Jean-Claude Trichet's words at 1230 GMT to see how strong the language on inflation will be, given several signals of slowing growth from recent economic data in the single currency zone.
By 1148 GMT, the euro was down 0.2 percent on the day versus the dollar at $1.5362, little changed from levels seen just before the decision.
The FTSEutofirst 300 index of leading European shares erased earlier losses after the ECB deicison to trade steady on the day at 1,361.44 points.
Euro zone government bond futures were little changed with June Bund futures <FGBLc1> up 34 ticks on the day at 113.91. December futures held steady after budging little soon after the ECB announcement.
"The market will wait to see if the ECB will be less hawkish than it has been," said Adarsh Sinha, currency strategist at Barclays Capital.
"The euro could be boosted if Trichet is not as dovish as people expect given the recent data," he added.
(Reporting by London Markets Team)
((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS EURO/ECB
LONDON, May 8 (Reuters) - Sterling briefly rose on Thursday, while stocks extended losses, while UK rate futures fell after the Bank of England held interest rates at 5 percent, as expected, despite some talk of a back-to-back cut.
Sterling initially rose to around $1.9600 <GBP=>, approaching a session high after the central bank's announcement, before wiping those gains out but was still up 0.1 percent on the day.
The euro initially slipped to around 73.35 pence, but recovered those losses to trade at 78.45 pence.
The FTSEurofirst 300 <.FTEU3> turned negative after the decision to trade 0.1 percent lower at 1,360.37 points.
Gilt futures were unchanged, up 26 ticks at 108.27. June short sterling fell to trade 8 ticks lower at 94.44, having been about 3 ticks lower before the decision.
While most market participants were expecting the BoE to stand pat on rates, a significant minority of investors had been anticipating a cut after cutting by 25 basis points last month.
"There was a bit of a bounce in sterling as there was some talk of a back-to-back cut going into the meeting after a run of gloomy data over recent days," said AIB Group Treasury economist Geraldine Concagh.
"It's only a matter of time before they do cut again and we would expect the next move to come in June," she added.
(Reporting by London Markets Team)
((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS BOE
LONDON, May 8 (Reuters) - Sterling jumped on Thursday, recovering from an early slump against the dollar as traders covered short positions in the currency ahead of a Bank of England announement on interest rates later in the day.
The pound climbed roughly 0.4 percent to $1.9614 <GBP=>, up more than a cent from the day's low.
Sterling gains weighed on the euro, which fell 0.7 percent to the day's low of 78.22 pence <EURGBP=>.
"It's a short squeeze. People have been short sterling over the last couple of weeks, and we are seeing some short covering ahead of the MPC," said a London-based trader.
The BoE will announce its rate decision at 1100 GMT. Many in the market expect the central bank will hold rates at 5 percent.
(Reporting by Simon Falush and Naomi Tajitsu)
((naomi.tajitsu@reuters.com; Tel: +44207 542 5830, Reuters Messaging: naomi.tajitsu.reuters.com@reuters.net))
Keywords: MARKETS FOREX/STERLING
LONDON, May 8 (Reuters) - The yen extended broad gains on Thursday as increased risk aversion has led investors to unwind carry trades where they borrow the low yielding yen to fund purchases in higher yielding assets.
By 0751 GMT the dollar had fallen as much as 1 percent to 104.95 yen while the euro was down 1.3 percent at 161.27 yen <EURJPY=>.
Falling stocks indicate increased risk aversion leading investors to bail out of the relatively risky carry trade and buy low yielding currencies like the yen. The FTSEurofirst 300 was down 0.6 percent <.FTEU3>.
"There's been a pick-up in risk aversion, which was helped by a large sell-off in U.S. equities," said Lee Hardman, currency economist at BTM UFJ.
(Reporting by Naomi Tajitsu and Simon Falush) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))
Keywords: MARKETS FOREX/YEN
LONDON, May 7 (Reuters) - The euro extended losses versus the dollar on Wednesday and bund futures trimmed losses after German manufacturing unexpectedly fell in March, adding to concerns about the health of the euro zone economy.
Manufacturing orders fell by 0.6 percent on the month compared to a forecast of a rise of 0.3 percent [ID:nL07688790] adding to a view that the European Central Bank may start to contemplate cutting rates.
This followed earlier losses for the euro after soft euro zone retail sales data.
"We have indeed seen some disappointing economic numbers this morning from the euro zone," said Teis Knuthsen, currency strategist at Danske Markets in Copenhagen. "All the data suggests that perhaps the euro/dollar has peaked."
By 1007 GMT the euro was trading down 0.7 percent at $1.5420 from $1.5470 before the data <EUR=>.
The June Bund future <FGBLM8> was last 34 ticks down on the day at 113.64, having stood at 113.60 before the data. The interest rate-sensitive two-year Schatz yield was 1.5 basis point up at 3.795 percent <EU2YT=RR> from a session high of 3.871 percent touched earlier. (Reporting by London Markets Team) ((simon.falush@reuters.com. +44 20 7542 7681) Reuters Messaging: simon.falush.reuters.com@reuters.net))
Keywords: MARKETS FOREX
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