(Updated at 2:48 p.m. ET/1848 GMT)

By Chuck Mikolajczak

NEW YORK, July 18 (Reuters) - The euro fell on Thursday

after the European Central Bank kept rates steady, as was widely

expected, while the dollar index climbed after

stronger-than-expected data on the U.S. labor market and

manufacturing.

The ECB gave no insight into its next move, arguing that

domestic price pressures remain high and inflation will be above

its target well into next year, leaving the market to decipher

comments from President Christine Lagarde for clues on the

central bank's next move.

"Compared to the Fed, the ECB may have been the first to

cut, but they won't be the fastest. When the ECB cut last it was

a cautious cut, now every meeting is going to be a live meeting

where the data will dictate every move," said Brian Jacobsen,

chief economist at Annex Wealth Management in Menomonee Falls,

Wisconsin.

"When the Fed cuts, it will be a confident cut where even a

month or two of bad data won't take them off their cutting path.

It's annoying that the Fed is waiting so long to cut, but

ultimately it will make for a clearer path."

The euro was down 0.37% at $1.0897, a day after

hitting a four-month high of $1.0947. It was poised for its

biggest daily percentage drop in a month.

On the U.S. front, weekly initial jobless claims jumped

by 20,000 to 243,000, above the 230,000 estimate of economists

polled by Reuters, although it is not considered to be a notable

shift in the labor market due to seasonal factors.

In addition, a gauge of manufacturing activity in the

U.S. Mid-Atlantic region expanded more than expected in July,

boosted by a surge in new orders.

The dollar index, which measures the greenback

against a basket of currencies, gained 0.49% at 104.18 a day

after touching a four-month low of 103.64, and was on track for

its biggest daily percentage gain since June 13.

The Federal Reserve is scheduled for its next policy

announcement at the end of July. Markets expect only a slight

chance for a cut of at least 25 basis points (bps), while almost

completely pricing in a cut at its September meeting, according

to CME's FedWatch Tool.

Fed officials expected to speak on Thursday include Bank of

San Francisco President Mary Daly and Governor Michelle Bowman.

Against the Japanese yen, the dollar strengthened

0.7% to 157.26, rebounding from a drop in the prior session that

sparked speculation of intervention by the Bank of Japan.

Analysts also attributed the weakness to comments from U.S.

presidential candidate Donald Trump about the dollar's strength.

Sterling weakened 0.5% at $1.2945 after British data

showed wages grew at a slower pace, but was still strong enough

to keep doubts about an upcoming rate cut from the Bank of

England afloat.

In cryptocurrencies, bitcoin fell 1.70% to

$63,428.00. Ethereum declined 0.62% to $3,394.90.