Dollar edges off lows against euro, central banks eyed

European Central Bank's Draghi to tiptoe to stimulus exit
Industry not expecting a hawkish Draghi at ECB meeting

21 July, 2017

The quantitative easing programme was introduced to stimulate the broader economy by taking bonds off bank balance sheets, but calls from economists to pare back the purchases have risen as growth and confidence have picked up in the Eurozone.

The single currency initially fell to $1.1479 against the greenback after the European Central Bank unanimously voted to hold interest rates at 0.00 percent and said that it remains poised to step in and increase the "size and/or duration" of its stimulus purchase, should the economic outlook take a downturn.

While Governing Council members expect to start a tapering discussion at their next policy meeting on September 7, they see reason to doubt they'll be able to reach a conclusion then, the people said, asking not to be identified because the deliberations are private.

However, Didier Rabattu, head of equities at Lombard Odier Investment Managers, believes ongoing weakness in inflation in the bloc and concern over the banking sector could dampen the Draghi's enthusiasm for raising rates.

European Central Bank President Mario Draghi says the bank's top officials don't have a date set for considering any change to the bank's stimulus programs. This year, an earnings revival has been enough to lure dip buyers facing a potential shift in monetary policy.

But wage growth remains anaemic, keeping a lid on inflation, which is likely to undershoot the ECB's target of nearly 2 percent at least through 2019.

There was virtually no chance that the European Central Bank would make any formal changes to its policies on Thursday.

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"We need to be persistent and patient because we aren't there yet", he told a news conference".

Analysts have been expecting the ECB to give a clearer sign at the September 7 meeting of when it might start decreasing its 60 billion euros ($69 million) in bond purchases, which are aimed at raising inflation from 1.3 percent toward the bank's goal of just under 2 percent.

After his comments at a central banking forum in Sintra, Portugal in late June, fed market expectations of an imminent tapering and send yields and the euro soaring, Draghi was very careful with each word he spoke so as to avoid the kind of market turbulence dubbed "taper-tantrum".

That hint did not come with the statement unchanged from the bank's June meeting.

"Measures of underlying inflation remain low and have yet to show convincing signs of a pick-up, as domestic cost pressures, including wage growth, are still subdued", Draghi said in his statement. The bank has restricted itself to purchasing no more than a third of the bonds issued by any country.

Warm weather lured United Kingdom shoppers to splash during June, mostly on clothing that led the retail sales higher. The bank has said it won't raise its benchmark interest rate from zero until the purchases end.

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