Monday, 19 November, 2018

European Central Bank to end crisis-era stimulus programme in December

EUR  CHF EUR CHF – 240 min Chart
Cristina Norman | 17 June, 2018, 11:43

Euro bulls who expected the European Central Bank to hike rates at an earlier juncture were caught out as the single currency slumped almost 1.9%, sending traders piling into the dollar and yen.

The euro was last down 1.37 percent to $1.1628, while the dollar index, which measures the greenback against six top currencies, rose 0.85 percent.

ECB President Mario Draghi declined to give more detail about the timing of rate moves in a news conference after the policy meeting, this time held away from the bank's Frankfurt headquarters in the Latvian capital Riga. European stocks surged, but the relatively stronger United States dollar weighed on commodities and brought a more muted reaction from USA investors.

Expectations of higher U.S. interest rates are also helping to make the U.S. Dollar a more attractive investment.

The European Central Bank announced on Thursday that it will bring to an end the €2.5 trillion (more than R31 trillion) bond buying programme it has undertaken since the eurozone debt crisis.

The single-currency plunged 1.68 percent after the European Central Bank said it planned to keep interest rates at record lows into the summer of 2019.

The ECB appeared to balance the phase-out of the stimulus programme with the pledge that the withdrawal of support for the economy would be gradual, and that interest rates could stay low for longer than the second quarter of next year if needed. U.S. President Donald Trump has chose to impose "pretty significant" tariffs and will announce a list targeting $50 billion of Chinese goods on Friday, and a second wave of products worth $100 billion has been cued up.

"The ECB has made it clear that it does not want quick rate hikes, although it now considers progress towards the inflation target as "substantial".

In New York, the S&P 500 added 0.3 per cent, while the Dow Jones Industrial Average ended 0.1 per cent lower and the Nasdaq Composite climbed 0.9 per cent.

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.

For years since the Great Recession, central banks around the world have thrown massive amounts of stimulus at markets, chiefly through the purchase of billions of dollars of bonds each month.

"I think the biggest concern at the moment, more than talk about trade, is the tightening of monetary conditions in emerging markets caused by a stronger dollar", said Michael Hewson, chief markets analyst at CMC Markets in London, noting the Federal Reserve's forecast for a total of four interest rate rises in 2018.

Oil prices fell as investors eyed a key OPEC meeting in Vienna.

USA crude fell 0.3 percent to $66.44 per barrel and Brent was last at $75.95, down 1.03 percent on the day.

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