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European Central Bank holds rates amid growth

European Central Bank holds rates amid growth

The Stoxx Europe 600 index fell 0.6% to end at 398.60, its lowest close since January 17. Germany's DAX was 0.87pc lower and France's CAC-40 was down 0.25pc.

The euro jumped to an intraday high of $1.2537 from $1.2410 late Wednesday in NY, marking the first time the shared currency has traded above $1.25 since late 2014.

Later on Thursday, financial markets will hang on European Central Bank president Mario Draghi's every word, putting pressure on him to play down talk of reducing stimulus. Fourth-quarter gross domestic product increased at a 2.6 percent annual rate, the Commerce Department reported. Investors are gearing up for the press conference where ECB President Mario Draghi is likely to insist on the need for monetary policy to stay accommodative until inflation nears the central bank's target of 2%.

The ECB chief commented on the euro's appreciation, noting that "recent exchange rate volatility is a source of uncertainty", but his warning was probably milder than some may have expected.

The dollar stumbled near multi-year lows on Thursday following the USA treasury secretary's comments that he welcomed a weaker greenback, while attention turned to whether the European Central Bank can stomach a surging euro at its policy decision.

On a trade-weighted basis, the euro's rise is far less marked, however. The higher euro can become a headache for Europe as it can hurt its exporters and weigh on inflation, which is already worryingly low.

What matters at this time is that the euro is now at the $1.25 mark. Barclays bank have forecast the GBP/EUR rate to be nearer 1.17 by the end of the year and the high 1.20s against the US Dollar.

Lessons from the Federal Reserve (Fed) - When the Fed stopped asset purchases in 2015, the global economy was lackluster, the US dollar was strong, and inflation was subdued.

Regarding its quantitative easing program, the central bank reiterated the EUR30 billion-a-month bond-buying program is meant to run until the end of September or "beyond if necessary".

The European Central Bank has left its interest rates and policy statement unchanged amid predictions that it will soon start signaling an exit from its extraordinary stimulus efforts.

Mario Draghi says the euro region is firing on all cylinders, and he's not about to get in the way.

Analysts said that Draghi not talking down the euro, as well as positive comments on the economy, sparked a sell-off in government bonds.

In his comments on Thursday, Draghi cited the repeated joint statements by worldwide finance officials in which they commit to refrain from lowering their currencies' exchange rates to gain trade advantage at the expense of other countries.

He said "that an ample degree of accommodation is necessary to help price pressures build up" adding that "there are very few chances that interest rates would be raised this year".

What's new in economic data? Business confidence also moved higher, as Ifo Business Climate improved to 117.6, up from 117.1 in the previous release.

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