ECB's Draghi Sees No Sign Of Inflation Picking-Up In Europe

Pound to euro exchange rate

The Frankfurt-based central bank said it will continue the current quantitative easing measures until at least December, when the central bank will decide how to proceed - by either terminating or extending the stimulus program.

The euro jumped to near-14-month-highs of $1.1571 against the dollar on Draghi's comments, recovering losses seen in the immediate wake of the ECB's policy decision earlier Thursday.

He added that the European Central Bank "probably doesn't have anything to worry about" in terms of market turmoil: "The market is already working off the assumption that the European Central Bank will gradually phase out bond buying, with the program likely ending by the end of next year".

While most economists have been expecting the bank to move towards a cut, it was not expected to come quite so soon.

The bond-buying programme, together with ultra-low interest rates, was created to fend off the threat of deflation hitting the eurozone.

ECB President Draghi was unable to push the Euro lower and a fresh dollar slide in United States trading triggered renewed gold support with prices just above $1,245 despite a lack of investor interest.

The Euro has rocketed, however, after markets responded positively to Draghi's suggestion that discussions on when QE and monetary policy should be changed will happen in the autumn, as economists had expected.

"Headline inflation is dampened by the weakness in energy prices", Draghi said in his introductory statement to the post-decision press conference.




"Draghi's choice to state that the European Central Bank remain willing to raise QE if necessary was largely disregarded, for we all know that given the current rate of economic improvement, it is only a matter of time until Draghi changes his tone".

The bank also retained its asset purchases of Euro 60 billion a month till December 2017, or beyond, if necessary.

'We can always debate the amount, but the fact that the United Kingdom must pay what it owes to the European Union budget is a non-negotiable prerequisite at the start of the talks'.

JAPAN TRADE: Upbeat economic growth and forecasts for China and the rest of the region, followed by news that Japan's exports rose almost 10 per cent in June from a year earlier also brightened sentiment.

Analysts think the central bank will have to taper off the purchases next year no matter what because it will start running out of eligible bonds to buy.

Oliver Brennan, senior macro strategist at TS Lombard, agreed that the tapering could be expected at an average pace of $10 billion per meeting, which would enable its completion in the third quarter of next year. The market-implied probability of a Federal Reserve rate hike by year-end has declined to about 40 percent from 60 percent on July 7, based on the current effective fed funds rate.

'Our outlook is optimistic and we aim to achieve growth in underlying earnings in the region of approximately 5% to 15% during 2018, ' said chief executive Mike Ashley.

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