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ECB keeps rates at 4%, press conference at 1345 GMT

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Bank of Japan chatter and Japanese data send yen soaring

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Gold shines at record high, Bitcoin and Egypt take a

breather

Graphic: World FX rates http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, March 7 (Reuters) - Europe was waiting for the

European Central Bank to shine some light on its interest rate

cut plans on Thursday after the Federal Reserve hinted it is

getting closer to a move again and the BOJ gave the yen a lift

with talk of lifting Japanese rates.

While stock and bond market traders were in

pre-ECB press conference holding patterns, FX dealers were

shoving the Japanese currency toward its strongest day

of the year with 1% jumps against both the dollar and euro.

Japanese workers' nominal pay in January grew 2%, data

showed. The country's major employment union has also won big

pay hikes in 2024 wage talks, while BOJ board member Junko

Nakagawa signalled her conviction that conditions for phasing

out negative rates were now falling into place.

With economists speculating that could now happen as soon as

this month, the yen roared up to 147.90 per dollar and

161.22 to the euro, which for both was the highest

in at least three weeks.

Attention has already turned though to the ECB. It has just

announced a widely expected decision to keep the key euro zone

interest rate steady at a record 4.0%, but its 1345 GMT press

conference was awaited for clues on cuts.

Isabelle Vic-Philippe, a euro zone bond fund manager at

Amundi, said markets were now "close to fair value" pricing in

3-4 ECB reductions this year starting in June.

One of the questions both she and many investors have though

is whether the ECB or the Fed will be the first out of the

blocks.

"I think the ECB can afford to cut a bit earlier if they are

convinced the Fed will follow shortly afterwards," Vic-Philippe

said. "My question (for ECB head Christine Lagarde) would be:

Where do you think the neutral rate for the ECB now stands?,"

she added referring to where they could end up settling at.

The Frankfurt-based central bank also published new staff

macroeconomic projections that pruned back both its inflation

and growth forecasts for this year.

Financial market futures are almost fully priced in for a

first rate cut in June, with a total easing of 88 basis points

expected for all of this year.

FED WATCH

Wall Street futures were edging higher ahead of more U.S.

economic data and commentary from Fed chief Jerome Powell.

U.S. stocks closed higher on Wednesday after Powell stuck to

the script by saying the bank still expects to cut rates later

this year even though continued progress on inflation "is not

assured".

That kept bets of a U.S. rate cut in June alive at an 84%

probability. Longer-term bond yields slipped, the dollar fell,

gold prices hit a record high and oil had jumped on Wednesday.

"There was nothing particularly surprising within Fed Chair

Powell's prepared monetary policy testimony to Congress," said

James Knightley, chief international economist at ING.

"More data is required, but with more evidence of a cooling

jobs market we still think they can cut rates from June."

Indeed, data showed U.S. private payrolls increased slightly

less than expected in February, although the report does not

have a strong correlation with the official non-farm payrolls

report due on Friday.

There was little cheer in markets to the better than

expected China trade figures overnight in Asia, however, after

an official from the state planner flagged the upside surprise a

day earlier.

Chinese blue chips fell 0.4%, weighed by a 3.3%

plunge in the healthcare sector on the news that a

U.S. bill targeting Chinese biotech companies like BGI and WuXi

AppTec was moving ahead.

The sharp rally in the yen had also seen the Nikkei

slide back 1.4% after it had hit a fresh all-time high earlier

in the session, while in emerging markets Egypt's currency was

taking a breather after its fourth major devaluation in two

years on Wednesday.

That combined with a whopping 600 basis-point interest rate

hike had helped Cairo land an $8 billion dollar IMF deal that

should put worries about a potential sovereign debt default to

bed for a good while at least.

Commodity prices gyrated on the weaker dollar. Gold prices

rose 0.4% to $2,156.49, another record high.

Oil prices were mostly lower, however, having jumped 1% the

previous session. Brent drifted back to $82.27 a

barrel, while bitcoin hovered near record highs at

$66,361 in the sizzling cryptocurrency markets.