European Central Bank keeps interest rates, guidance unchanged

Euro May Fall as PMI Data Sets the Stage for Dovish ECB
ECB To Be Neutral For The Euro Exchange Rates On Thursday - SEB
Author

27 April, 2018

The ECB is expected to wind down its 2.55 trillion euro (2.22 trillion pounds) bond-buying programme by the end of this year and raise its policy rate for the first time since 2011 towards the middle of next year.

The dollar edged lower on Thursday, but stayed above the 90 level, as the USA 10-year Treasury note continued to put pressure on the currency market, breaking through the 3 percent barrier for the first time since early 2014 this week.

Oil was back on the rise, feeding what are likely to be questions for the European Central Bank on rising inflation and supported by expectations of renewed USA sanctions on Iran and declining output in crisis-hit Venezuela.

A recent "moderation in growth" across the 19-nation currency union probably reflected temporary factors such as cold weather or the timing of public holidays, Mr. Draghi said at a news conference Thursday.

The U.S. Dow Jones bluechip index had snapped a five-day losing streak on Wednesday, thanks to strong corporate earnings.

Deutsche Bank fell 2.6 per cent after the bank said it would scale back its bond and equities trading in a major overhaul of its investment bank, after reporting a 79 per cent drop in net profit in the first quarter.

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"The worry is about an overheating, leading to a rise in inflation, higher interest rates which bring on a textbook recession".

No change to the rates and the statement remains similar to what we've seen in March.

The single currency rose 0.1 per cent to $1.2168 but remains 2-1/2 cents off levels hit only last week, after a bounce in US Treasury yields fired up dollar buying and encouraged some to question whether the euro's rally since previous year had run out of steam.

With today's decision, the ECB's bond purchases, aimed at stimulating growth and inflation through rock-bottom debt costs, will continue at €30 billion a month at least until the end of September, or beyond if needed to prop up inflation. The yield on 10-year German government bonds slid to 0.59%.

Credit Agricole strategist Orlando Green said: "The risk is that he (Draghi) is less dovish than expected". It fetched $1.2185 before the European Central Bank meeting as the dollar saw only its second drop in eight sessions. This could send the euro lower.

The breather for the dollar helped emerging market currencies regain some ground having been nearly universally whacked by the combined yield and dollar rise over the last week.


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