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Euro and sterling rise against dollar after dovish Fed meeting

The euro has hit its highest level for more than two years and sterling is trading around its highest since last September, after Wednesday’s dovish Federal Reserve meeting pushed the dollar to a 14-month low.

The dollar index, a measure of the greenback against a basket of its peers, is finding some support in European trading after hitting a 14-month low of 93.152 in the immediate aftermath after the Fed’s statement.

On Thursday morning the index was at 93.525, leaving it down 0.2 per cent on the session and taking its decline over the year to date to over 8.5 per cent.

Sterling is up 0.1 per cent on Thursday to $1.314, while the euro is flat at $1.172.

European bourses are seeing a flurry of corporate earnings results on Wednesday, in one of the biggest days of the year for trading updates.

The Dax opened 0.7 per cent lower as financials and exporters’ results underwhelmed, but has since scaled back some losses and is now 0.2 per cent down on the day.

The FTSE 100 is also dipping, down 0.2 per cent.

The downward moves follow Wednesday’s trading in which US indices hit new record highs following comments from the US Federal Reserve.

European government bond yields are following Treasuries downwards, with the 10-year Bund dipping 4 basis points to 0.52 per cent. 10-year gilts are down 0.4 per cent at 1.2 per cent.

Yields on 10-year US debt have partially reversed Wednesday’s falls, rising 1 basis point to 2.29 per cent.

Russ Mould, investment director at AJ Bell, said:

The US Federal Reserve may think it is talking tough but the financial markets clearly don’t think so.

The slow pace of tightening . . . hardly seems to be a vote of confidence in the US economy, even after nearly nine years of unorthodox monetary policy, and if tightening is an attempt to stop markets overheating . . . Ms Yellen needs to move faster, as the US stock market is clearly taking the Fed’s baby step-policy as a signal to gallop higher.