Euro slides as 'downbeat' ECB warns on economy

Euro slides as 'downbeat' ECB warns on economy

Euro currency
File photo of 500-euro banknotes. (Photo: AFP/Miguel Medina)

LONDON: The euro slipped on Thursday (Dec 13) after the ECB trimmed its growth forecast for the eurozone because of "mounting uncertainties" from within and outside the region.

European Central Bank chief Mario Draghi said risks facing the area were now "moving to the downside", although that did not stop the bank from pulling the plug on its massive emergency crisis-fighting economic stimulus known as quantitative easing (QE).

"While Mario Draghi was boxed in by previous announcements about QE, his press conference revealed two stark truths - he remains deeply concerned at the fragility of eurozone growth and reserves the right to administer further monetary stimulus," said JR Zhou, market analyst at online trading platform Infinox.

David Madden, market analyst at CMC Markets, said a "downbeat Draghi" weighed on the single currency.

Europe's major stock markets, meanwhile, held mostly steady, with "dealers still hopeful that Beijing and Washington DC are on the road to striking a deal" on trade, Madden said.

Share prices were also supported by mild gains on Wall Street in the New York morning.

'UPSIDE' FOR STERLING

Under its "quantitative easing" programme, the European Central Bank has pumped €2.6 trillion (US$3.0 trillion) into the eurozone economy in order to stoke growth and inflation.

The ECB originally began buying debt in 2015, saying it wanted to fight the threat of deflation and keep money flowing around the eurozone economy.

Growth has picked up since then, surging in 2017 before falling back this year.

The British pound meanwhile pushed higher, one day after Prime Minister Theresa May won a vital confidence vote that was sparked by her Brexit deal.

READ: British PM May survives confidence vote over Brexit deal

"Our view is that a 'no-deal' Brexit remains quite unlikely, despite all the recent political upheaval", Capital Economics said.

"With this in mind, we think that the risks are skewed to the upside for sterling," it said.

Asian equities posted more gains on Thursday as investors were cheered by conciliatory noises from China and the US on trade.

While the tariffs row between Beijing and Washington is far from being resolved, there is a lot more optimism on trading floors this week that the world's top two economies can make headway in talks over the next three months.

Dealers mulled a report that Beijing is considering replacing its "Made in China 2025" programme that aims to boost its technology sector, a key point in anger for Washington.

The Wall Street Journal said authorities were looking at putting back the scheme's timetable by a decade to concentrate on improving standards.

That followed news China had agreed to resume importing soybeans - a major boost for US farmers - as well as remove a levy on US autos imposed earlier this year in response to Donald Trump's initial tariffs.

Key figures around 1640 GMT:

London - FTSE 100: FLAT at 6,877.50 points (close)

Frankfurt - DAX 30: FLAT at 10,924.70 (close)

Paris - CAC 40: DOWN 0.3 per cent at 4,896.92 (close)

EURO STOXX 50: UP 0.1 per cent at 3,110.76

New York - Dow Jones: UP 0.2 per cent at 24,580.82

Tokyo - Nikkei 225: UP 1.0 per cent at 21,816.19 (close)

Hong Kong - Hang Seng: UP 1.3 per cent at 26,524.35 (close)

Shanghai - Composite: UP 1.2 per cent at 2,634.09 (close)

Pound/dollar: UP at US$1.2635 from US$1.2629 at 2200 GMT

Euro/dollar: DOWN at US$1.1353 from US$1.1369

Dollar/yen: UP at 113.68 yen from 113.29 yen

Oil - Brent Crude: UP 8 cents at US$60.23 per barrel

Oil - West Texas Intermediate UP 25 cents at US$51.41 per barrel

Source: AFP/de

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