European Central Bank leaves key rates on hold as expected

Terry Joseph
April 27, 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 ECB decision is due at 1145 GMT and president Mario Draghi will begin his press conference at 1230.

World markets remained edgy on Thursday, with shares eking out gains amid concern over the global economic outlook and with USA bond yields at four-year highs after breaking above the psychologically significant 3 percent line 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 US sanctions on Iran and declining output in crisis-hit Venezuela.

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

Deutsche Bank was up about half a percent, giving up some early gains.

"Euro/dollar continues to fall as long positioning gets pared back against a backdrop of negative realised returns and we remain tactically bearish on the pair", the analysts said.

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Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €30 billion, are meant to run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

A dealer said the greenback hit multi-months high against a basket of currencies, bolstered by higher US Treasury yields, led by the 10-year benchmark breaching the three per cent threshold this week for the first time in four years.

Following a meeting of the ECB's governing council, the Eurozone's central bank revealed that interest rates on refinancing and on lending would remain unchanged at 0 per cent and 0.25 per cent respectively.

"The risk is that he is less dovish than expected", Green added.

France's Total gained 0.8 per cent after it reported record production lifted profits, while Royal Dutch Shell declined 1.8 per cent despite reporting a 42 per cent rise in first-quarter profit.

The US 2-year bond yield also dropped 0.3 percent to 2.480. It fetched $1.2185 before the European Central Bank meeting as the dollar saw only its second drop in eight sessions.

"With equity market sentiment holding firm in the face of rising bond yields, the almighty dollar could move through G-10 currency markets like a wrecking ball", Innes added.

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