European Shares Hold Steady Ahead Of ECB Meeting

The euro edged off eight-week lows on Thursday as traders readied for a European Central Bank meeting, when investors will be searching for any signals about when the bank will begin unwinding its stimulus.

Having tweaked its guidance last month to reflect solid growth, Mr Draghi argued the economy is humming along and that the exceptional growth readings seen around the turn of the year were never expected to be sustained.

But what about the recent slowdown in the euro-zone economies?

The ECB is expected to wind down its 2.55 trillion euro (2.22 trillion pounds) bond-buying programme by the end of this year and raise its policy rate for the first time since 2011 towards the middle of next year.

At the European Central Bank governing council meeting, it was decided that the Eurozone base interest rate will remain at 0.00 percent, with the marginal lending rate and deposit rate remaining at 0.25 percent and minus 0.40 percent respectively.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €30 billion, are meant to run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. While the Nasdaq tech index fell again, it could benefit from a strong after-market rise in Facebook which posted forecast-beating results.


"Euro/dollar continues to fall as long positioning gets pared back against a backdrop of negative realised returns and we remain tactically bearish on the pair", the analysts said.

Business sentiment has already taken a hit, particularly in export-focused Germany, and a full-fledged trade war could quickly hurt growth - a risk already highlighted by policymakers at the ECB's March meeting.

A key worry is that protectionist rhetoric from the United States could push down the value of the dollar even as the Federal Reserve is likely to raise interest rates several times this year, to support the U.S. currency.

The dollar edged lower on Thursday, but stayed above the 90 level, as the U.S. 10-year Treasury note continued to put pressure on the currency market, breaking through the 3 percent barrier for the first time since early 2014 this week.

The impact of the euro's strength has been relatively limited so far, however.


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