By Chibuike Oguh and Harry Robertson
NEW YORK/LONDON (Reuters) -The U.S. dollar dipped against major currencies on Thursday as markets weighed data showing slower-than-expected U.S. economic growth, signs of an uptick in inflation, and an interest rate cut by the European Central Bank.
Commerce Department data on Thursday showed the U.S. economy grew by an annualised 2.3% in the fourth quarter, slightly below analysts’ expectations, amid weak business spending. Inflation edged higher, with the personal consumption expenditures (PCE) price index rising 2.5%.
The ECB cut borrowing costs by 25 basis points, as widely expected, and left the door open to further cuts as concerns over a lacklustre economy supersede worries about persistent inflation.
Markets are priced for further ECB cuts in March, April and June, with about 90 basis points of easing implied for 2025.
The dollar weakened 0.69% to 154.13 against the Japanese yen. Against the Swiss franc, the dollar strengthened 0.06% to 0.907.
The euro was up 0.06% at $1.0426. Sterling strengthened 0.14% to $1.2462.
“You’re talking about very small moves,” said Vassili Serebriakov, FX strategist at UBS in New York.
“Maybe one element was that President Lagarde said they didn’t discuss a 50 basis point cut so I think it was probably a bit helpful for the euro but it doesn’t really change the broader picture,” Serebriakov said.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.11% to 107.78.
The Fed on Wednesday left its benchmark overnight interest rate in the 4.25%-4.50% range, with officials removing the reference that inflation having “made progress” toward the Fed’s 2% inflation goal.
By contrast, other central banks including Canada and Sweden both cut rates by a quarter point. Brazil’s central bank hiked by a full percentage point to 13.25% overnight and flagged more to come.
Bank of Japan Deputy Governor Ryozo Himino said on Thursday that Japan’s central bank would continue to raise interest rates if the economy and prices move in line with the bank’s forecasts.
Howard Lutnick, U.S. President Donald Trump’s nominee to run the Commerce Department, said on Wednesday that Canada and Mexico could avoid looming U.S. tariffs if they acted swiftly to close their borders to fentanyl. Trump has threatened to impose tariffs on Saturday.
The Mexican peso < MXN=> strengthened 0.58% versus the dollar to 20.411, while the Canadian dollar strengthened 0.07% to C$1.44 against the greenback.
“I think one of the dominant themes is not so much the central bank decisions… The focus more is now shifted to tariffs and then with secondary focus on artificial intelligence,” said Matthew Weller, global head of market research at StoneX.
“The market is essentially pricing in that Trump will be a lot more restrained in issuing tariffs on other countries this time around and that essentially it’s all bluster.”
(Reporting by Chibuike Oguh in New York, Wayne Cole in Sydney and Harry Robertson in London. Editing by Michael Perry, Mark Potter, Alex Richardson and Christina Fincher)
