The European Central Bank expectedly kept the key interest rates unchanged

EUR  USD price chart

"If you take the overall stance of the US administration, it's protectionist and still it's not clear what kind of dollar the president and the Treasury want", said Vassili Serebriakov, FX strategist at Credit Agricole in NY. If the value of the US Dollar continues to fall then exports will become cheaper and the US trade balance should start to tighten up.

The euro at one point zoomed up more than 1% to a 3-year high of over USD1.25 after Draghi told the press conference that the bank was confident inflation was edging its way closer to its goal.

But a strengthening euro is taking the edge off that trend; a stronger currency tends to pull consumer prices lower as import costs are reduced.

In his comments on Thursday, Draghi cited the repeated joint statements by global finance officials in which they commit to refrain from lowering their currencies' exchange rates to gain trade advantage at the expense of other countries.

"The recent volatility in exchange rates represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability", Draghi said at a press conference.




The stimulus would come from asset purchases, asset holding, reinvestment and forward guidance that interest rates will remain low, Draghi said. The ECB kept rates unchanged as expected, earlier.

However, the euro has continued to make gains against the U.S. dollar as continued strength in eurozone domestic economic data has prompted speculation that the European Central Bank could adopt a more hawkish stance this year. The bank gave little additional hint about whether its 30 billion euros ($36 billion) in monthly bond purchases would run past September.

Stimulus withdrawal has been much discussed in markets because the eurozone economy is growing strongly. Looking at a year ago, the European Central Bank managed to increase the forecasts for 2018 to 2.3% from the latter 1.8%.

The purchases pump newly created money into the economy to raise inflation and growth in the wake of the 19-country eurozone's crisis over high debt in member states like Italy and Greece.

The bank left its key short-term interest rate benchmark unchanged at a record low of zero.

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