Published: Sat, March 10, 2018
Finance | By Kristine Clayton

European Central Bank leaves rates unchanged, drops easing bias

European Central Bank leaves rates unchanged, drops easing bias

A strict language on the trade front could wake euro bears up.

Meanwhile, he noted, the US Federal Reserve is raising rates and reducing its holding of bonds. Gold traders are also awaiting further news on plans for U.S. tariffs on some imported goods.

The Canadian dollar was 0.2 percent firmer at C$1.2881 per dollar, having weakened to C$1.3002 on Wednesday but recovering on the prospect that Trump's tariffs may exempt Canada and Mexico. The German DAX 30, though, tumbled by 0.52% with all sectors being in the red except technology and industrials.

However, Deppe voiced concerns over threats of a trade war coming from the United States.

US West Texas Intermediate (WTI) crude futures were at $US61.22 a barrel, down 0.1 per cent, while benchmark Brent was 0.2 per cent lower at $US64.20 a barrel.

Gold dropped 0.4 percent at $1,320.68 an ounce.

European shares ended on a high, buoyed by a weaker euro on the back of cautious comments from European Central Bank president Mario Draghi on inflation, while mergers and acquisitions (M&A) news also sparked some sizeable stock moves.

As expected, the European Central Bank held its key interest rates at record lows, but it signalled greater confidence in the eurozone economy and its own chances of hitting its elusive inflation goal by dropping talk of boosting its mass bond-buying programme.

The indicators such as business confidence, unemployment and credit growth, correspond to the ECB's positive estimate of future growth of 2.3% this year and 1.9% next year. This year's forecast was not changed at 1.4 percent, but next year's headline CPI was lowered to 1.4 percent from 1.5 percent.

News that U.S. President Donald Trump is prepared to meet North Korea's Kim Jong Un in what would be the first face-to-face encounter between the two countries' leaders helped ease fears about geopolitical tensions, denting safe-haven bonds.

Friday's nonfarm payrolls data for February, a key barometer of the U.S. economy, is also being awaited for further clues on the pace of Federal Reserve rate increases.

Based on our regular economic and monetary analyses, we made a decision to keep the key European Central Bank interest rates unchanged.

Elsewhere, Japan will report on household spending for the month of January at 2330 GMT.

Britain's 10-year yield declined two basis points at 1.474 percent. This compares to a fall of 0.1% seen in the previous month. In this context, the Governing Council will continue to monitor developments in the exchange rate and financial conditions with regard to their possible implications for the inflation outlook.

Viraj Patel, a currencies analyst at ING, expects a subtle change in the ECB's forward guidance that will remain broadly supportive for the euro, with a "potential test of $1.25 on the cards".

The shift in tone suggests that officials who want to set a more definite course toward the exit after four years of extraordinary stimulus are getting the upper hand in the 25-member Governing Council.

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