* Euro falls after Bloomberg report on inflation
* ECB declines to comment
* Dollar recovers from 7-week low vs yen
* Graphic: FX rates in 2017 tmsnrt.rs/2egbfVh
By Ritvik Carvalho and Patrick Graham
LONDON, June 7 The euro fell more than half a
percent on Wednesday after a report suggesting the European
Central Bank, rather than swinging decisively towards a tighter
monetary stance this week, is preparing to cut its outlook for
The single currency had recovered almost 10 percent against
the dollar in the past five months, benefiting from broad
greenback weakness but also on the view that rising inflation
would prompt the ECB to raise interest rates in early 2018.
But with global inflation pressures waning, and with euro
zone data coming in weaker in recent data releases, that view
has started to shift, and the ECB is not expected to signal a
change in policy at its meeting this week.
Bloomberg, citing unnamed euro zone officials, said the
central bank's staff forecasts for inflation for the next three
years had been cut to 1.5 percent, from 1.7 percent, 1.6 percent
and 1.7 percent, respectively in March.
Those have still to be approved by the two-day meeting of
the Governing Council that starts on Wednesday, the news agency
said, but, if true, would be a signal of a softer line than many
in currency and bond markets have been expecting.
The ECB declined to comment on the report.
"If you downgrade your inflation forecasts the next year
you’re basically sending a message to the market – ‘We’re not in
any rush’," CMC Markets' chief markets analyst, Michael Hewson,
"The ECB doesn’t want a strong euro so what better way of
pushing it back down against a weakening dollar and pulling the
rug out from any potential hawkishness at tomorrow’s meeting.
They’ve basically lowered expectations."
By 1155 GMT, the euro had fallen 0.6 percent to $1.1215
and 122.72 yen respectively. It was similarly
weaker at 86.88 pence per pound.
The dollar rates compare with a seven-month high of $1.1285
hit last week.
The moves also came as the dollar recovered some of this
week's more than 1 percent loss against the yen, due largely to
broad nerves over the pace of U.S. growth and government policy
that have cut U.S. Treasury yields to the lowest since November.
Traders remain cautious before Thursday's UK election, which
some worry may be far closer than some polls indicate, as well
as the U.S. Senate testimony of James Comey, the former FBI
chief sacked by President Trump.
The greenback fell as low as 109.115 yen, its weakest
since April 21, before recovering to stand flat on the day at
"Tomorrow’s what is being dubbed as 'Triple Threat
Thursday'...an event-filled day that could send global markets
on a bumpy ride," ING currency strategist Viraj Patel wrote in a
note to clients.
Any damaging revelations in Comey's testimony is likely to
further hurt Trump and take the wind out of his plans to roll
back regulations and overhauling the tax system - an agenda that
sent the dollar to 14-year highs this year.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by