Euro Drops, Bonds Gain on Dovish ECB; Dollar Rises

• Euro Drops, Bonds Gain on Dovish ECB; Dollar Rises

The euro weakened and core European government bonds rose as investors weighed the prospect of the ECB sticking with its loose monetary policy. The dollar pared its biggest quarterly loss in a year and gold fell.

Europe’s common currency fell against most Group-of-10 peers after a central bank official doused expectations policy makers were planning to withdraw monetary support, echoing the message expressed by colleagues on Wednesday. The South African rand bounced as the country’s president faces a potential rebellion within his own party over the fate of his finance minister.

The ECB’s dovish tone once again establishes the diverging outlook between U.S. and European monetary policy. Two Federal Reserve officials signaled there may be more than the three rate increases currently projected for this year, as the world’s biggest economy progresses toward goals for full employment and 2 percent inflation.

Here are key events the rest of this week:

• Other Fed officials are scheduled to make appearances, including Bank of Cleveland President Loretta Mester and Bank of Dallas President Robert Kaplan.
• The U.S. reports its third estimate for fourth-quarter gross domestic product on Thursday, while Friday’s data include data on personal spending and incomes.
• German inflation data for March will probably show signs of deceleration as energy-price gains peter out. German prices may rise 1.8 percent from the year before after CPI accelerated 2.2 percent in February.
• There are central bank rate decisions in South Africa, Egypt and the Czech Republic.