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Euro cuts losses against dollar on ECB

Tuesday, April 15 17:02:15

The dollar erased gains against the euro today as traders discounted recent comments from ECB policymakers and an uptick in U.S. inflation wasn't enough to suggest a potential change in the Federal Reserve's dovish stance.

The euro recovered against the dollar after Monday's losses, which occurred after ECB President Mario Draghi on Saturday sent the strongest signal yet the central bank would act to prevent deflation in the shared currency. The impact of the comments receded, with traders awaiting more decisive action from the ECB. [ID: nL2N0N40IS]

There is still skepticism the ECB will act or that the effects of their actions will be substantial, said Bob Lynch, head of G10 FX strategy at HSBC Bank USA in New York.

The euro recovered despite a survey showing a dip in German economic sentiment in April. The German ZEW survey of investor and analyst sentiment in Europe's largest economy fell for a fourth consecutive month in April as the crisis in Ukraine weighed on the outlook. But the current conditions survey rose to its highest level since July 2011.

The dollar received little support from U.S. economic data on inflation and housing. The Labor Department said its Consumer Price Index increased 0.2 percent last month as a rise in food and shelter costs offset a decline in gasoline prices. The CPI index had gained 0.1 percent in February.

Inflation pressures remained generally benign, however, and did not suggest the Fed would raise interest rates sooner than expected.

"We are getting a little hotter U.S. inflation, but it's still quite low ... and I don't think it moves the policy dial much," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut.

In addition, data showed while U.S. homebuilder sentiment edged up in April, it remained mostly dour on lingering concerns about stiff credit conditions for buyers and tight supply of building lots and labor.

The NAHB/Wells Fargo Housing Market index rose to 47 in April from a downwardly revised 46 in March, the group said in a statement. Economists polled by Reuters had predicted the index would rebound to 50 in April.