Dollar Rallies after Draghi Signals Normalization Would Be Gradual


The EURO STOXX 50 closed 1.1% up at 3,415.74 points.

The euro dropped to $1.2314 from $1.2411 late Wednesday in NY.

Pizza delivery firm Domino's Pizza rose 2.6 per cent following a better-than-expected 10.2 per cent rise in its full year pretax profit.

What was driving the market?

Spot gold was at $1,325.69 an ounce by 10.25am GMT, little changed from late on Wednesday, when it rose to a one-week high of $1,340.42 before closing 0.6% lower. Shares of European exporters can be hurt when the euro rises, as euro strength can reduce revenue made overseas by such companies.

While Thursday's European Central Bank (ECB) policy decision has the biggest potential to influence the Pound to Euro (GBP/EUR) exchange rate outlook this week, Friday's United Kingdom and Eurozone data could also affect trade if it surprises.

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The drop in the ECB's easing bias also spilled over to other markets.

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Wednesday's news was mixed enough to see the Pound dip and then strengthen again by the end of the day.

Along with record-low interest rates, bond-buying was created to stoke economic growth by pumping cash into the financial system, helping boost inflation to the ECB's own target of just under 2 percent.

Projections for next year and 2020 were kept unchanged at 1.9 percent and 1.7 percent, respectively. The main repurchasing interest rate at zero, the deposit facility rate at -0.4% and maintaining its commitment to €30bn in monthly asset purchases until at least September under its tapered quantitative easing programme.

Keeping its broader policy unchanged, the European Central Bank said it could still extend its 2.55 trillion euro ($3.16 trillion) bond purchase scheme beyond September if needed but omitted a reference to bigger purchases, a signal that it remains on track to end a three-year-old stimulus scheme before the end of 2018.

At the same time the US Dollar is a holding pattern this morning as markets remain cautious following Trump's signing of an order introducing trade tariffs on metal imports.

News that U.S. President Donald Trump is prepared to meet North Korea's Kim Jong Un in what would be the first face-to-face encounter between the two countries' leaders helped ease fears about geopolitical tensions, denting safe-haven bonds. Bank of England policy makers say they may need to raise interest rates faster than previously anticipated and new Federal Reserve Chairman Jerome Powell has talked up the economy so much that there's speculation of as many as four US hikes this year.

"Today's marginally hawkish concession from the European Central Bank has been overshadowed by a marginally negative revision to their inflation forecasts today, with the DAX hitting the highest level in a week in response", Joshua Mahony, a market analyst at IG, wrote in emailed comments.