Tuesday, 20 November, 2018

Bond-buying era draws to close as euro area faces increased risk

EUR  CHF EUR CHF – 240 min Chart
Scott Davis | 17 June, 2018, 11:42

The bank said that the stimulus programme's bond purchases would be halved to €15bn per month from October.

The dollar advanced above ¥110.50 in Tokyo trading Friday, reflecting its surge against the euro following the European Central Bank's decision to keep policy interest rates low.

The concerns are that there's still an unsure economic outlook, which could be complicated by a developing trade war with the United States.

The dollar index .DXY dipped 0.3 percent to 93.391 after briefly rising to 94.028 on Wednesday, with analysts citing the fact that the rate rises were probably priced into the USA currency and a shift in focus to the European Central Bank.

The outlook for the Euro US Dollar (EUR/USD) exchange rate is now rather mixed, with the imminent rate decision liable to make or break demand depending on the revealed sentiment of the central bank.

The euro bounced on Friday after suffering its worst day in almost two years when the European Central Bank signalled it would keep interest rates at record lows into the summer of 2019.

Since launching the program of quantitative easing in March 2015, the central bank has bought about €2.5 trillion ($2.9 trillion) of bonds and other assets to stimulate the eurozone economy.

Higher interest rates typically bolster a currency as it becomes more attractive to hold.




Draghi said there would be no prospect of an increase in the ECB's key lending rate - now 0.0% - until next summer at the earliest.

Trump, whose hardline stance on trade has seen him wrangle with allies, said in a statement a 25 percent tariff would be imposed on a list of strategically key imports from China. USA officials say the tariff hike targets goods that might benefit from Chinese theft of technology or pressure on foreign companies to hand it over in exchange for market access. The program is credited with raising inflation to the ECB's target of just under 2 percent.

The Dow Jones industrial average closed 0.1% lower on Thursday.

Bank of Japan head Haruhiko Kuroda meanwhile on Friday defended his bank s decision to press ahead with the country s ultra-loose monetary policy. More evidence arrived that the USA economy is improving, meanwhile, which helped send the S&P 500 to its fourth gain in the last five days.

Boosted by the ECB's announcement and positive comments on the euro from politicians in Rome, Italy's government bonds were on course for best week since Mario's Draghi's "whatever it takes" Outright Monetary Transactions programme was created in September 2012.

Oil prices were down, facing pressure from evidence of rising US output and uncertainty over supply, before a meeting next week of the world's largest exporters.

West Texas Intermediate crude oil futures were down 0.2 per cent at US$66.76 per barrel; Brent was down 0.6 per cent at US$75.49.

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