* Euro hits 9-day low after drop in German annual inflation
* Euro zone short-term rates pulled low by ECB sources
* ECB policymakers speaking on Thursday back existing
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, March 30 Low readings for German
inflation drove the euro back to nine-day lows against the
dollar on Thursday.
Dollar bulls are still recovering from the collapse in
faith in the "Trumpflation" trade caused by last week's defeat
for the White House on healthcare and the greenback was again
struggling to make progress past 111 yen.
But against the euro it gained a quarter of a cent, trading
as strong $1.0731 after several German states reported a
slump in annual inflation to well below the ECB's 2 percent
That later delivered an overall national number of 1.5
percent and added to signals from sources close to the bank on
Wednesday that ECB officials were unhappy at a shift in market
expectations towards tighter monetary policy and higher euro
zone interest rates.
"That sort of off the record briefing that came through
yesterday and German inflation this morning do seem to have
pulled the rug from under the euro," said Nick Parsons, a
strategist with National Australia Bank in London.
"More generally it has been pretty quiet this morning. We
are in one of those awful periods where we cannot decide which
currency we dislike the least. And that tends to lead to lower
The fall for the euro, down from a 4-1/2-month high of
$1.0906 scaled on Monday, helped the broader dollar index into
positive territory, up 0.1 percent at 100.15.
Sterling, knocked back by the dollar's recovery as Prime
Minister Theresa May lodged Britain's formal request to leave
the European Union on Wednesday, was also down 0.1 percent at
Several ECB policymakers said on Thursday the bank should
stick to its already laid out policy path.
Reuters on Wednesday reported ECB sources as saying that
policymakers had been taken aback by moves to price in an
interest rate hike early next year and would be keen at their
April meeting to reassure investors that their easy-money policy
was far from ending.
"It’s a bit soon to draw conclusions but yesterday’s ECB
sources piece put a dampener on front end rates and that has
weakened sentiment towards the euro somewhat," said Citi G10
currencies strategist Josh O'Byrne.
"The mood around the dollar has softened a lot. On balance I
think most people still buy into this stronger global demand
story but it may be a bit late in the day to be chasing this
For Reuters Live Markets blog on European and UK stock
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(Editing by Jeremy Gaunt)