The euro climbs, erasing earlier losses

The ECB could debate winding down bond-buying at its June meeting
Chief Investment Office06 Jun 2018
Photo credit: AFP Photo

European Central Bank (ECB) policymakers anticipate holding a pivotal discussion at their meeting next week that could conclude with a public announcement on when they intend to cease asset purchases, according to Euro Area officials familiar with the matter.

ECB President Mario Draghi’s Governing Council is likely to treat the 14 June gathering in Latvia as an opportunity to debate winding down bond-buying, said the officials, who asked not to be named because such matters are confidential. Purchases are currently intended to run until at least September.

While some see the meeting as a suitable moment to take and announce a decision on what to do after that, it is possible nothing will materialise next week. Draghi may use his press conference to signal an announcement will come in July, one of the people said. An ECB spokesman declined to comment.

The euro erased its earlier losses on the report, trading little changed at USD1.1695 at 6:11 p.m. Frankfurt time. It finished the New York session 0.16% higher at USD1.1718.

June may prove to be a critical opportunity for the central bank to show its confidence in the Euro-area economy. While the pace of growth has slowed from last year’s decade high, the expansion remains intact and inflation jumped last month. The bond-market scare that hit Italy last week appears to be contained for now, meaning it is unlikely to affect monetary policy. A June decision also has the advantage of being accompanied by fresh economic forecasts, which are published every quarter, should those predictions show output remaining robust and price growth gradually accelerating.

By July, the outlook may appear more clouded. Inflation is expected to slow as energy costs come off a peak, and Italy’s new government has pledged to pursue a high-spending agenda that could bring it into conflict with European Union rules. – Bloomberg News.

The US Dollar Index (DXY) slipped 0.17% to 93.88. The British pound advanced 0.60% to USD1.3393. The Japanese yen lost 0.03% to 109.79 per dollar.

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