WSJ: UPDATE: Euro Bounces As Draghi Dents Dovish-Tone Hopes
-- Euro rises after the ECB's Draghi says a rate cut wasn't even discussed
-- Draghi's uncompromising message surprised some market players
(Rewrites throughout.)
By Alexandra Fletcher
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--The euro rose Thursday against the dollar, pound, and yen as European Central Bank President Mario Draghi dashed tentative market hopes for hints of additional stimulus after the ECB earlier left interest rates unchanged, as expected.
In a press conference after a week of weak data that showed the euro-zone economy is worsening, Draghi said the ECB hadn't even discussed a cut, denting hopes that the central bank might open the door to policy easing further ahead.
"Overall, [Draghi's] answers...struck me as being mildly positive for the euro. We continue to expect weakening to come [against the dollar], but this is more reliant on U.S. [economic] prospects improving than European monetary policy expectations changing quickly," said Paul Robinson, chief currency strategist at Barclays in London.
Of 47 banks and think tanks polled by Dow Jones Newswires, all had expected ECB rates to maintain its benchmark rates at a record-low 1% for a fifth straight month.
Even so, with data this week showing a sharp slowdown in the euro-zone manufacturing in April and the region's unemployment rate hitting a record-high in March, there had been some market chatter in the buildup to the conference that Draghi might be in a dovish frame of mind.
That encouraged some traders to put on bets against the single currency that were subsequently reversed as Draghi dented those hopes.
"There is disappointment that the ECB council is not more dovish," said Michael Sneyd, currency strategist at BNP Paribas in London.
However, Richard Cochinos, another currency strategist at Bank of America-Merrill Lynch in London, said the ECB could yet signal rate cuts as early as next month, at its next regular policy meeting.
By 1416 GMT, the euro was at $1.3159 against the dollar, having dropped to $1.3095 as Draghi began speaking and then bounced to as high as $1.3180. It traded at JPY105.65 against the yen and at GBP0.8132 against sterling.
European equities also stabilized after an initial knock.
-By Alexandra Fletcher, Dow Jones Newswires, 44 20 7842 9462; alexandra.fletcher@dowjones.com @djfxtrader
