European Central Bank gets ready to pull the plug on stimulus

ECB calls halt to quantitative easing, despite 'soft' euro

The European Central Bank just called time on its €2.5 trillion stimulus programme

The ECB has laid out plans to continue its €2.3trn (£2trn) asset purchase programme (APP) until the end of the year while indicating interest rates will remain at their current levels until the summer of 2019.

"The Governing Council expects the key European Central Bank interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path", the European Central Bank said in a statement.

"The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council's medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to euro 15 billion until the end of December 2018 and that net purchases will then end", the bank said in a statement on Thursday. It will be reduced from September to an estimated Euro 15bn per month and then discontinued.

Karen Ward, chief market strategist at JPMorgan Asset Management, said the move to end QE by end-year as previously signalled was significant in light of the recent Italian mini-crisis that saw bond yields there soar to multi-year highs.

Asset purchase program is not disappearing, instead, it remains a normal instrument of monetary policy, said Draghi. China's central bank also showed caution as it left its interest rates on hold, rather than follow the Fed as it sometimes does.

"The ECB has made it clear that it does not want quick rate hikes, although it now considers progress toward the inflation target as "substantial".

Today's monetary policy decisions maintain the current ample degree of monetary accommodation that the central bank hopes will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term. The ECB's 2019 and 2020 estimates remain at 1.9% and 1.7% respectively.

"To be sure, the Fed is not inclined to hike rates any more than gradually after years of mostly over-optimistic predictions for inflation and economic growth, and disappointing wage gains of around 2.5 percent annually".

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European markets were mixed, while stocks in Asia were mostly lower.

The Pound to US Dollar (GBP/USD) exchange rate is trending at 1.3294. It is this news that seems to be driving the euro and euro bond yields lower.

European Central Bank policymakers had earlier signaled that they will discuss the way to end quantitative easing in summer.

Mr Draghi said the bank's policy has helped create millions of new jobs, with unemployment falling from over 12% during the crisis to 8.5%. "It is certainly a possibility now".

The leading dollar index, which typically moves inversely to gold, also gained, after spending the early part of the day in the red.

People are paying attention to the bond purchase exit because it will have wide-ranging effects in markets and the economy. Break of the May-low (1.1510) opens up 1.1390 (61.8% retracement), with the next region of interest coming in around 1.1210 (61.8% retracement) to 1.1220 (78.6% retracement).

This is in line with investors' expectations.

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