Euro settles lower after ECB decision

The euro held below a three-day high on Thursday after the European Central Bank, as expected, kept its policy rate unchanged and investors waited to see whether there are any further hints on the pace of policy normalization.

The ECB’s decision keeps it on track to end its vast bond purchases by the close of the year and to keep rates record low at least through next summer.

Attention now turns to ECB President Mario Draghi’s news conference at 1230 GMT for signs of whether the ECB elaborates on how it will use redemptions from its bond purchases after the scheduled close of the quantitative easing program at the end of 2018.

“The key watch points will be the central bank’s interpretation of external risks and an improving inflation outlook, along with any commentary on the future reinvestment policy within its asset purchase program,” Morgan Stanley strategists said.

The euro was a shade weaker at $1.1710, down form $1.1719 before the ECB decision. It had gained overnight from a low of $1.1664 after European Commission President Jean-Claude Juncker and U.S. President Donald Trump agreed to negotiate on trade.

Trump said they had agreed to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods”. He agreed to refrain from imposing car tariffs while the two sides launch negotiations, easing the threat of a transatlantic trade war.

Currency markets were far more circumspect about the outcome of the summit than equity and bond markets as investors waited for the fine print.

“The one thing we have learned from the last 18 months of Trump’s gyrating trade policies is that whatever looks certain today is likely to be undermined tomorrow,” Gavekal strategists said in a note.

Source: Reuters