Draghi Wonders Who Needs Friends Like These After Trump Threat

EURUSD outlook Economic information for the week ahead

EURUSD outlook Economic information for the week ahead

The main repurchasing interest rate at zero, the deposit facility rate at -0.4% and maintaining its commitment to €30bn in monthly asset purchases until at least September under its tapered quantitative easing programme.

Bond yields too partially erased their earlier rise, as markets interpreted Draghi's comments as suggesting that any policy normalization would be very gradual.

Bond purchases at that pace are now slated to continue until September at least, while the European Central Bank also left key interest rates unchanged.

Odd, or not, while the European Central Bank needs to communicate effectively its intentions to gradually remove stimulus and begin steps towards policy normalisation, it does not want to do so at the risk of driving the euro rapidly higher.

While the synchronised global economic expansion is helping get people back into work and forcing interest rates to rise, there is a sense of deja vu brewing about two notable parts of the world. Still, the absence of strong inflation pressures is a feature of the big developed economic blocs after the crash and it makes it hard to forecast the outlook for inflation.

Late in the session, President Trump imposed import tariffs on steel and aluminum, while softening his stance by announcing exemptions for Canada and Mexico, and leaving open the chance for other countries to obtain their own.

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"This outlook for growth confirms our confidence that inflation will converge towards our inflation aim.over the medium term", Draghi said. But he said such disputes should be worked out among trade partners, not decided by measures initiated from one side.

He also reminded Trump that previous trade wars had typically led to a strengthening of the dollar.

"Our view that the Bank will not tighten policy anytime soon is increasingly shared by the analyst consensus: More than 60% of analysts polled by Reuters expect the Bank to leave policy settings unchanged this year".

The change was part of the long journey back to normalising monetary policy, according to Simon Barry, chief economist at Ulster Bank in Dublin, who said that while ECB president Mario Draghi played down its significance, the ECB was responding to clear evidence of economic improvement, albeit with inflationary pressures still weak.

Its inflation projections were also unchanged for 2018 at 1.4 percent, but slightly lowered for 2019 from 1.5 to 1.4 percent.

On the currency markets the dovish message won out. Spot gold was down 0.3% at $1,321.09 an ounce at 3pm GMT. Against the pound, the euro was 0.13% lower at £0.8916 and fell 0.65% to Y130.81 versus Japan's yen.

The interest rates decision came as no surprise to the market. USA gold futures were down 0.4% at $1,321.80.

Half an hour before the close of trade on Thursday, the EuroStoxx 50 was up 1.05% at 3,415.

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