Trump tariffs cast dovish shadow over European Central Bank

Trump tariffs cast dovish shadow over European Central Bank

Trump tariffs cast dovish shadow over European Central Bank

Shortly after the announcement of the bank's decision, the Euro appreciated by 0.06% to 1.2419 Dollars.

The euro gave up all its early gains against the dollar to turn lower after Draghi said monetary policy would remain "reactive" and that measures of underlying inflation were still subdued.

The ECB will reinvest the principal repayments of maturing securities acquired under the asset purchase program for a prolonged period after the net asset purchase has ended and in any case as long as necessary.

German and French five-year bond yields came off two-week highs to end up lower on the day as the session drew to a close.

The removal of the so-called easing bias from its monetary policy decision sparked a rally of euro against the US dollar. Germany's 10-year government bond yield was 2 basis points lower at 0.63 percent DE10YT=RR. But its statement omitted an earlier promise that it could increase its bond-purchase stimulus in size or duration if the economic outlook worsens.

Traders were waiting to see if the rate setters would remove that particular bit, as it could indicate the end of QE is moving closer.

M&G deputy head of retail fixed interest Stefan Isaacs said while the European Central Bank noted the risk of protectionism, as well as the strength of the euro, it also upped its growth forecast to 2.4%.

Projections for next year and 2020 were kept unchanged at 1.9 percent and 1.7 percent, respectively.

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Taken together with the actual outlook for the currency from foreign exchange dealers - it is set to rise more as the dollar falls - there is cause for concern, or at the least, an inclination to consider if we haven't been here before.

Trump is expected to announce his tariff decision by the end of this week. The White House said late on Wednesday that Canada, Mexico and possibly other countries may be granted exemptions.

"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.

'In itself this was not market moving, but Mario Draghi succeeded in talking the Euro - and Eurozone bond yields - down in his ensuing press conference'.

Which stocks were in focus?

Casino Guichard-Perrachon SA (CO.FR) fell 3.7% after the French retailer posted a sharp drop in 2017 profit (

Britvic PLC (BVIC.LN) jumped 6.2% after Morgan Stanley upgraded the soft drinks maker's rating to overweight from equalweight.

It also raised its growth forecast to 2.4 per cent for 2018, up from 2.3 per cent it expected in December. "After a material pull-back YTD, Britvic's current share price offers an attractive entry point", said analyst Richard Felton in a research note.

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