Euro zone growth revised up to highest rate in two years

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Euro zone growth revised up to highest rate in two years

Eurostat said the 19-country euro zone expanded by 0.6% quarter-on-quarter and by 1.9% year-on-year.

The euro fluctuated after the decision, dropping to US$1.12165 from US$1.1241 following the statement.

The ECB sees the need for continued and substantial monetary easing to secure sustained inflation rates. It now expects consumer prices to rise by only 1.3% next year, some way below its target of just below 2%.

"Headlines suggesting that the European Central Bank will revise its inflation forecast lower through 2019 suggests that the hawks will struggle to make the case for an early normalization of the ECB's policy settings", says Shaun Osborne at Scotiabank.

The meeting of the ECB's governing council was dedicated above all to slight corrections to their communication, explaining that the risks for growth are now "broadly balanced" and no longer tilted to the downside.

But Mr. Draghi also warned inflation would remain weak over the coming years, and said European Central Bank members hadn't discussed winding down their EUR60 billion-a-month bond-purchase program.

Sterling is set to remain volatile due to Brexit uncertainty.

Draghi said the central bank would remain poised to extend its accommodative monetary policy if necessary.

The bank left interest rates unchanged in the June meeting and dropped any mention of a rate cut.

Market participants were turning their attention to ECB President Mario Draghi's press conference at 12.30 GMT, for the banks assessment of the euro area economy.

The previous projections in March foresaw rates of 1.7%, 1.6% and 1.7%, respectively.

David Zahn, head of European fixed income at Franklin Templeton, believes accommodative monetary policy could extend into 2019.

Speaking in Tallinn, Estonia, on the bank's annual trip away from its headquarters in Frankfurt, Draghi said that the bank could still expand its QE programme, also known as the APP (asset purchase programme), despite a widespread belief in the markets that QE will be gradually reduced from the end of 2017 onwards.

The more important driver for the market, di Galoma said, was the expected rate hike by the Federal Reserve next week as well as USA long-dated Treasury debt auctions.

The euro area growth forecast for this year was raised to 1.9% from 1.8%.

Policymakers also reiterated their pledge to increase the size or duration of the bond-buying programme if the economy deteriorates. The central bank will continue to buy €60bn of bonds, including government debt, each month until at least the end of the year.

Saxo Bank's John Hardy told CNBC ahead of the announcement that he believed any immediate dip in the euro during Thursday's meeting would be short-lived, but added that the leak may have been used to prevent a euro rally.

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