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ECB's Draghi says growth has moderated, outlook solid

ECB's Draghi says growth has moderated, outlook solid

Credit Agricole strategist Orlando Green said markets expected ECB President Mario Draghi to focus on the softer recent data and address concerns about euro strength and global trade tensions.

"Following several quarters of higher than expected growth, incoming information since our meeting in early March points towards some moderation while remaining consistent with a solid and broad based expansion of the euro area economy", Mr Draghi told reporters in Frankfurt.

This leaves the door open to ending lavish bond purchases by the close of the year.

The president also suggested that the focus of the European Central Bank governing council was on the most recent data rather than revising current forward guidance on monetary policy.

Robert Sierra, of Fitch Ratings said: "Along with the recent flat core inflation numbers and Draghi's emphasis in the press conference on the impact of the stronger euro on inflation, the ECB's tone has become slightly more dovish".

While the ECB's 2.55 trillion euro ($3.10 trillion) bond purchase programme, has cut borrowing costs and kick-started growth, although with no inflationary effect, policymakers will need to end the indefinite growth of money.

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The ECB's interest rate on its main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at zero, 0.25 and -0.40 percent respectively.

"The music is still playing and we are still dancing, but we are reducing risk", said Pau Morilla-Giner, chief investment officer at London & Capital.

With the bond-buying scheme due to expire in September, the European Central Bank will have to decide in June or July whether to extend purchases or wind them down.

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. This, in turn, could have ramifications for the ECB's sole policy objective of ensuring price growth returns to its near 2 percent target.

The dollar edged lower on Thursday, but stayed above the 90 level, as the United States 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 recent jump in US bond yields has caused US-Japan and US-German yield differentials to widen further in the dollar's favour, leaving the yen and the euro lower.


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