Euro dips on report on ECB inflation goal, dollar flat

NEW YORK: The euro dipped on Thursday following a report the European Central Bank staff is studying a potential change to its inflation goal, while the dollar was little changed amid bets the Federal Reserve would lower interest rates in two weeks.

Sterling rose for a second day, rebounding from a 27-month low against the greenback, on surprisingly strong UK domestic retail sales last month and developments that would make it harder for the next prime minister to force a no-deal Brexit.

Trading among major currencies was mostly muted as market players wait to see whether the Fed would lower US rates for

the first time in a decade and if it would signal more rate cuts down the road.

The futures market implied traders are positioned for at least three rate cuts by year-end, with the first decrease at the Fed's July 30-31 policy meeting.

"If it sounds like it's one and done, there would be massive repricing," said Steven Englander, global head of G10 FX research at Standard Chartered. "That would be hard for the market to digest."

At 11:20 a.m. (1520 GMT), an index that tracks the dollar against a basket of currencies was down 0.07% at 97.152.

The dollar did not budge after US Treasury Secretary Steven Mnuchin told Bloomberg earlier Thursday there has been "no change to the dollar policy." He later told Reuters that there was no change to the use of a $94.6 billion federal fund intended to stabilize currencies during times of market turmoil.

There has been speculation whether the White House would intervene to weaken the dollar after US President Donald Trump lashed out at Europe and China earlier this month for what he called their "big currency manipulation game."

The euro dipped against the greenback following a Bloomberg report that the ECB staff are studying a potential change to the bank's inflation goal of "near 2%."

Such a move would potentially leave the door open for more ECB stimulus to continue for a longer period, which would exert downward pressure on the single currency.

The euro hit a session low of $1.1205 before moving to $1.1228, which was nearly unchanged on the day.

The dollar fell to a two-week low at 107.620 yen.

Sterling strengthened against the greenback after data showed UK retail sales unexpectedly grew 1.0% in June, stoking hopes the economy would avert a downturn in the second quarter.

On Thursday, British lawmakers supported proposals to make it harder for the next prime minister to force through a no-deal Brexit by suspending Parliament.

The pound was up 0.47% at $1.2489 after hitting a 27-month low of $1.2382 the previous day. The euro was 0.42% lower at 89.9 pence, below a six-month high of 90.15 pence struck on Wednesday.