European Central Bank pushes back rate hike again as outlook dims

ECB Meeting Preview- Negative Rates and TLTROs

ECB Ponders Further Monetary Stimulus To Counter Trade, Brexit Risks

More crucially, though, although ECB chief Mario Draghi didn't hesitate to reassure markets that the bank stands ready to increase monetary stimulus if needed, he remained confident about the outlook, saying the risk of a recession was low. Central bank policies can also have a strong influence on asset prices; low rates on savings can make riskier investments such as stocks relatively more attractive. Everyone is now pricing into expectations that the Federal Reserve will cut interest rates as early as the coming months, but I don't see this as being that easy for Dollar bears. Alongside this, GBPUSD saw a brief spike to highs of 1.2720 after BoE Governor Carney stated that rates will need to be raised if the economy evolved as they expect.

European stock markets delivered a mixed response on Thursday to an update from European Central Bank, as it became the latest central bank to adopt a dovish stance faced with fears of a global economic slowdown and the US-China trade war.

"Current ECB growth forecasts look too high so markets will be interested in whether the growth forecasts are revised down in light of the ongoing trade concerns", said Michael Bell, global market strategist with JP Morgan.

Analysts have in recent weeks pointed to so-called "five-year/five-year" swaps - which reflect how financial players judge the pace of price growth between five and 10 years from now - close to their lowest ebb under Draghi's eight-year tenure.

The bank may also set the stage for more action later this year as the trade tensions unravel the benefits of years of stimulus for a consistently-sluggish euro zone economy. Rising external risks have caused the Governing Council to clearly signal its dovish bias.

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The extension of the bank's rate-hiking timeline sparked a rally in the euro.

The long-term loans to banks will start in September and initially be priced at the main refinancing rate plus 0.1 percentage point.

The central bank also said it would offer low rates on previously announced two-year loans to banks, provided that the banks exceed lending benchmarks - a step aimed at keeping credit flowing to businesses. The main refinancing rate is now zero, and the deposit rate is minus 0.4%.

Mr Draghi told a news conference following the policy announcement that the decisions taken had been unanimous.

But Draghi said European Central Bank governors had been forced to reassess this judgment given US-China trade tensions, the continued uncertainty about the timing and terms of Brexit, and "more generally the uncertainty about global trade growth". "And then of course the uncertainty about Brexit negotiations, the uncertainty of vulnerabilities of certain emerging-market countries, which are important".

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