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Euro drops, bonds gain on dovish ECB, dollar rises

London - The euro weakened and core European government bonds rose as investors weighed the prospect of the ECB sticking with its loose monetary policy. The dollar pared its biggest quarterly loss in a year and gold fell.

Europe’s common currency fell against most Group-of-10 peers after a central bank official doused expectations policy makers were planning to withdraw monetary support, echoing the message expressed by colleagues on Wednesday.

The South African rand bounced as the country’s president faces a potential rebellion within his own party over the fate of his finance minister.

The ECB’s dovish tone once again establishes a diverging outlook between US and European monetary policy.

Two Federal Reserve officials signalled there may be more than the three rate increases currently projected for this year, as the world’s biggest economy progresses toward goals for full employment and 2% inflation.

“The ECB is likely to tread very carefully in the coming months, and not adjust their forward guidance or tone significantly before they feel more comfortable about the economy and inflationary pressure,” Bas van Geffen, an analyst at Rabobank International, wrote in a note.

Here are key events the rest of this week:

Other Fed officials are scheduled to make appearances, including Bank of Cleveland President Loretta Mester and Bank of Dallas President Robert Kaplan.

The US reports its third estimate for fourth-quarter gross domestic product on Thursday, while Friday’s data include data on personal spending and incomes.

German inflation data for March will probably show signs of deceleration as energy-price gains peter out. There are central bank rate decisions in South Africa, Egypt and the Czech Republic.
Here are the major moves in the markets:

Asia

Japan’s Topix fell 0.9%, while the Shanghai Composite dropped 1%, retreating for a fourth straight day. Australia’s S&P/ASX 200 index climbed for a third day to the highest since April 2015 as energy shares jumped.

Stocks

The Stoxx Europe 600 Index was little changed at 11:30 in London after closing on Wednesday at the highest since December 2015. Futures on the S&P 500 Index fell 0.1%. The benchmark gauge rose 0.1% on Wednesday.

Currencies

The euro fell 0.2% to $1.0740, after declining 0.9% over the previous two days. The British pound was little changed. The Bloomberg Dollar Spot Index rose 0.2% and the rand strengthened 0.8%.

Bonds

German bonds gained, with the yield on both five- and 10-year bonds dropping by around one basis point after a series of lower than forecast regional inflation data releases pointed to a lower headline figure.

Yields on 10-year Treasuries were little changed at 2.38%. The rate fell four basis points on Wednesday after rising the same amount in the previous session.

West Texas Intermediate crude dropped 0.4% to $49.33 a barrel, after surging 2.4% on Wednesday after a bigger-than-forecast decline in US gasoline stockpiles.

Gold slipped 0.2% to $1 250.54 an ounce.

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Rand - Dollar
19.02
-0.6%
Rand - Pound
24.01
-0.5%
Rand - Euro
20.52
-0.3%
Rand - Aus dollar
12.35
+0.0%
Rand - Yen
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Platinum
900.40
+0.4%
Palladium
998.40
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Gold
2,211.77
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Silver
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Resource 10
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