Euro gains after ECB stimulus disappoints

NEW YORK (Reuters) - The euro gained against the dollar on Thursday after the European Central Bank launched new stimulus but failed to live up to some dovish market expectations.

FILE PHOTO: The German Central Bank (Bundesbank) presents the new 50 euro banknote at its headquarters in Frankfurt, Germany, March 16, 2017. REUTERS/Kai Pfaffenbach

The ECB cut its deposit rate to a record low -0.5% from -0.4% and will restart bond purchases of 20 billion euros a month from November.

It also said it expects bond purchases to run for as long as necessary and end shortly before it starts raising the key ECB interest rates.

“We got a little bit of everything, but when all was said and done I think markets were expecting the bazooka to come out, and we definitely didn’t get the bazooka,” said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.

The euro gained 0.55% to $1.1069, after initially dropping as low as $1.0925. That was the lowest since the single currency fell to $1.0924 on Sept. 3, which was the weakest in more than two years.

The euro was also boosted after the ECB said that euro zone banks will be exempted from paying a penalty charge on idle cash worth six times their mandatory reserves.

Central banks globally are fighting against slowing growth and tepid inflation, with the U.S.-China trade war adding further headwinds to the global economy.

The dollar gained against the safe-haven Japanese yen after Bloomberg News reported that Trump administration officials have discussed delaying or rolling back some tariffs on Chinese goods.

CNBC later cited a White House official denying that the United States is considering an interim deal with China.

U.S. President Donald Trump on Wednesday welcomed China’s decision to exempt some U.S. anti-cancer drugs and other goods from its tariffs, and announced a short delay to scheduled tariff hikes on billions worth of Chinese goods.

The greenback was last up 0.31% at 108.14 yen.

U.S. data on Thursday showed that underlying consumer prices increased solidly in August, leading to the largest annual gain in a year, but rising inflation is unlikely to deter the Federal Reserve from cutting interest rates again next week to support a slowing economy.

It comes after data on Wednesday showed that U.S. producer prices unexpectedly rose in August.

This next major economic focus will be retail sales data on Friday.

Editing by Nick Zieminski