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Euro pops after ECB says it could revisit policy message soon - CNBC

JANUARY 11, 2018
  • A change in the ECB's policy message would likely be taken by investors as a sign that rate-setters are getting ready to wind down their 2.55 trillion euros bond-buying programme, the key plank of their stimulus policy for the past three years
  • Launched three years ago, the asset purchases depressed borrowing costs, staving off the threat of deflation and putting growth on its best run since before the bloc's debt crisis
  • critics say that the scheme has run its course and in a period above trend growth, artificially low borrowing costs risked more damage than good by inflating asset price bubbles

Reuters with CNBC.comThe stars of the European Union (EU) sit on banners flying outside the European Central Bank (ECB) headquarters stands in Frankfurt, Germany, on Thursday, July 20, 2017.

 

Krisztian Bocsi | Bloomberg | Getty Images

The stars of the European Union (EU) sit on banners flying outside the European Central Bank (ECB) headquarters stands in Frankfurt, Germany, on Thursday, July 20, 2017.

The euro jumped against the dollar on Thursday after the European Central Bank said it could revisit its communication stance in early 2018, boosting expectations that policymakers are preparing to reduce their vast monetary stimulus programme.

With the euro zone seeing its best growth in a decade, the ECB should gradually shift its stance to avoid a more disruptive move later and look at a broader revision of its policy guidance to reduce the focus on bond purchases and raise the emphasis on interest rates, accounts of the ECB's December meeting showed.

Mario Draghi, president of the European Central Bank (ECB), reacts during a news conference to announce the bank's interest rate decision at the ECB headquarters in Frankfurt, Germany, on Thursday, Jan. 19, 2017.

Krisztian Bocsi | Bloomberg | Getty Images

Mario Draghi, president of the European Central Bank (ECB), reacts during a news conference to announce the bank's interest rate decision at the ECB headquarters in Frankfurt, Germany, on Thursday, Jan. 19, 2017.

"It's certainly more of a hawkish tilt in the minutes," said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments in Toronto.

"The expectation that the ECB is moving toward removal of stimulus is helping lift interest rate yields further. This has been long expected but there was more formality in the minutes around how the bank will manage the forward guidance process as they exit unconventional policy," Schamotta said.

"There was quite a bit of money sitting on the sidelines looking for this hint."

The euro was up 0.78 percent to $1.2036, on pace for its biggest single-day percentage gain against the greenback in about two months.

The dollar index, which measures the greenback against six rival currencies, was down 0.5 percent at 91.88, after falling to a nearly one-week low 91.808.

The greenback extended losses after data showed U.S. producer prices fell for the first time in nearly 1-1/2 years in December amid declining costs for services.

Weak inflation at the producer level could add to concerns that the factors restraining inflation could become more persistent and result in the Federal Reserve being more cautious about raising interest rates this year.

The U.S. central bank's preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has undershot its target since May 2012.

The Canadian dollar steadied against the greenback after hitting a nearly two-week low as investors weighed chances of a Bank of Canada interest rate hike next week and worried about the possibility of a U.S. withdrawal from NAFTA.

Bitcoin was 7.54 percent lower at $ 13,767.26 on the Luxembourg-based Bitstamp exchange after South Korea's government said it plans to ban cryptocurrency trading.

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