The European Central Bank left its policy unchanged and launched a “strategic review” of its inflation goal and tools.
With Thursday’s decision, the ECB’s rate on bank overnight deposits remains at a record low of -0.50%.
ECB reaffirmed its pledge to keep rates at rock bottom or even cut them until inflation in the euro zone headed back to its target of just under 2%. The ECB has fallen short of its inflation target for years despite increasingly aggressive stimulus measures under Lagarde’s predecessor, Mario Draghi.
The ECB introduced a stimulus program in September and data since then have suggested some improvement in the euro zone’s economy.
Investors will focus on Christina Lagarde’s answers to questions about the ECB’s strategic review, which could see changes to its inflation target. Lagarde will announce the scope of the bank’s strategic review at her second news conference as ECB president at 1330 GMT.
The strategic review may last months and includes topics from the inflation target to digital money and the fight against climate change. The review is expected to be broad and may redefine the ECB’s main goal and how to achieve it.
Investors will be looking for clues to whether the review will see Lagarde cement her predecessor’s legacy of monetary largesse.
START TRADINGForex – ECB Policy unchanged but strategically reviewed
The U.S. dollar was otherwise firm, rising a bit against the euro and kiwi and edging up to 97.552 against a basket of currencies.
The euro remained stuck in its recent trading range on Thursday before the European Central Bank’s meeting. Euro/dollar traded little changed at $1.1094. The pair’s volatility has collapsed in the absence of major monetary policy shifts.
The euro briefly fell to a near three-year low against the Swiss franc of 1.0729 before recovering to 1.0743.
The Canadian dollar dropped again, reaching a one-month low of 1.3171 against the U.S. dollar, after the Bank of Canada signaled a future rate cut if a recent slowdown in domestic growth persists.
The safe-haven Japanese yen firmed as investors sought safety. Seen as a haven by virtue of Japan’s position as the world’s largest creditor, rose 0.2% to a two-week high of 109.59 per dollar.
Τhe battered Australian dollar jumped 0.5% to $0.6879 after a surprise drop in unemployment to a nine-month low. The kiwi has shed more than a cent this year as the domestic economy stalls.
Britain’s pound held on to its recent recovery as investors weighed up whether the Bank of England would cut interest rates next week. Against the dollar, it was on the back foot at $1.3129.
Against the euro the pound steadied at 84.41 pence, after dipping to a mid-December low of 84.23 pence on Wednesday.
Gold prices edged lower on Thursday as cautious investors awaited a policy decision by the ECB due later in the day.
Spot gold was down 0.3% at $1,554.24 per ounce by 1127 GMT. U.S. gold futures fell 0.2% to $1,553.80.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money