The European Central Bank kept its ultra-easy policy firmly on hold on Thursday but ECB chief Mario Draghi will now face the difficult task of addressing the euro's potentially damaging surge against the dollar. Even as the euro zone economy roars ahead, a strong euro threatens to dampen inflation and endanger the work done by years of unprecedented stimulus, probably forcing Draghi to pour cold water on rising expectations that the ECB is speeding towards an interest rate hike.
His task was made even more delicate overnight when top U.S. officials made their case for a weak dollar, sending the greenback to a three year low against the euro and raising fears of renewed trade wars. Still, in a widely expected decision, the ECB kept its key interest rate deep in negative territory, maintained a pledge to hold rates steady until well after bond buys conclude and promised to continue asset purchases until a sustained rebound in inflation.
"The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases," the central bank said in a statement. He is now set to address reporters in a 1330 GMT news conference where the euro's rise and expected changes in the bank's policy guidance will likely take centre stage.
U.S. Treasury Secretary Steve Mnuchin said he welcomed a weak dollar, arguing that it was good for U.S. trade, and Commerce Secretary Wilbur Ross said "U.S. troops are now coming to the ramparts" in global trade wars.
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