FOREX-Euro dips on reports ECB chief to leave, dollar extends gains after data

By Chuck Mikolajczak

NEW YORK, Feb 18 (Reuters) - The euro declined on Wednesday after a report that European Central Bank (ECB) President Christine Lagarde planned to step down early, while the dollar extended gains following a batch of economic data and ahead of the minutes from the Federal Reserve's January meeting.

The Financial Times reported Lagarde plans to leave her job early, ahead of next year's French presidential election, to give outgoing French leader Emmanuel Macron a say in picking her successor.

However, the ECB said that Lagarde had not yet made a decision on the end of her term.

The dollar strengthened after a flurry of U.S. economic data was stronger than anticipated.

The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rose 0.6%, above the 0.4% forecast of economists polled by Reuters, after an upwardly revised 0.8% increase in November.

In addition, the Federal Reserve said manufacturing output rose 0.6% last month, the largest gain since February 2025, after being unchanged in December, topping the 0.4% estimate.

"The manufacturing renaissance could be beginning in earnest. Not only did manufacturing employment increase in January, output also increased," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

"With a growing pipeline of new orders, this could be more than just another head-fake."

The dollar index =USD, which measures the greenback against a basket of currencies, rose 0.33% to 97.45, with the euro EUR= down 0.31% at $1.1816.

The greenback was on track for its third straight advance and biggest daily percentage gain since February 5.

Sterling GBP= weakened 0.21% to $1.3536 after official figures showed Britain's annual rate of consumer price inflation fell to 3.0% in January, in line with the estimate of economists polled by Reuters, from 3.4% in December.

FED MINUTES, GEOPOLITICS IN FOCUS

Investors were looking ahead to the Fed's minutes from its January meeting for signs on the path of interest rates and any commentary about the impact of AI on the economy, especially worker productivity and labor markets. Concerns about disruption from AI have rattled various sectors, notably software names, in equity markets in recent weeks.

Markets are not pricing in more than a 50% chance of a cut of at least 25 basis points from the Fed until its June meeting, according to CME's FedWatch Tool, the first after current Chair Jerome Powell's term ends.

Focus also remains on geopolitics, with Iran and the U.S. reaching an understanding on the main "guiding principles" in a second round of indirect talks over their nuclear dispute on Tuesday, although a deal is not imminent, Iranian Foreign Minister Abbas Araqchi said.

YEN SOFT, KIWI SLUMPS

Against the Japanese yen JPY=, the dollar strengthened 0.72% to 154.39.

The Trump administration announced three projects valued at $36 billion to be financed by Japan, the first of some $550 billion in projects Tokyo agreed to undertake in order to lower U.S. tariffs.

Elsewhere, the kiwi NZD= weakened 0.94% versus the greenback to $0.5988 after the Reserve Bank of New Zealand held its key rate unchanged at 2.25% in its first meeting chaired by Governor Anna Breman, and said policy would likely stay accommodative for some time.

"The statement largely downplayed most of the recent improvement in the domestic data, with the recovery in the growth data seen as still being at an early stage, and continued confidence in headline inflation returning to target after recent upside surprises," said analysts at Goldman Sachs in a note.