Dollar rises above ¥110.50 in Tokyo on euro weakness

ECB calls halt to quantitative easing, despite 'soft' euro

The European Central Bank just called time on its €2.5 trillion stimulus programme

After that, it expects to reduce purchases to €15bn a month until the end of December 2018, when "net purchases will then end". The central bank said that "uncertainties regarding the prospects for the German economy are considerably greater than they were". The purchases, which pump newly created money into the financial system, have driven down longer-term interest rates for borrowers such as governments and home buyers but have reduced returns for savers and made it harder to fund pension savings due to low returns on safe investments.

Elsewhere, the central bank left its interest rates unchanged, meaning a deposit rate of -0.4%.

Making the reduction in bond purchases "subject to incoming data" means governors are "retaining some flexibility, although the bar for policy change is arguably very high", Ducrozet wrote.

This development occurred in the wake of a decision made by the European Central Bank to keep interest rates at record lows into 2019 while simultaneously moving to end its massive bond purchase scheme which was previously implemented as part of its anti-crisis measures.

"The ECB has mapped out a definitive trajectory for quantitative easing and set a far-off date for the earliest rate hikes".

But, with European Central Bank, the market is not certain about the timing of the QE end, tapering projections, and interest rate projections.

The euro dropped sharply against the dollar following the announcement to trade around $1.17.

The program has driven down borrowing costs and supported an economy recovery in the 19 countries that use the euro. That, in turn, increased spending and helped spur economic growth and inflation. The Fed purchased some $3.6 trillion in bonds, while the ECB will have loaded 2.6 trillion euros ($3.1 trillion) of bonds on its balance sheet, in both cases a measure of the total size of the banks' stimulus efforts.

"Despite the ECB signalling an upcoming end to QE, the market has interpreted its new time-specific forward guidance dovishly and sent the euro packing", said Miles Workman, an economist at ANZ Bank New Zealand, in a note.

The bank also lowered its Eurozone growth forecasts, amid the quicker than expected economic activity slowdown since the beginning of the year.

There's been an "unquestionable increase in the geopolitical uncertainty", he said, citing an upsurge in protectionist trade policies.

This may really give us a picture of how the Federal Reserve is the central banker to the world.

"We didn't discuss when to raise rates", he said.

The common currency shed 1.9 per cent after the rate comments in its sharpest daily fall in nearly two years. US President Donald Trump was planning to meet with trade advisers later to decide whether to activate the tariffs, a senior administration official said on Wednesday.

While the improvement in inflation dynamics could well spark a discussion on a possible QE exit, we think that it is too soon for any concrete policy announcements from Mario Draghi.

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