Morning Chronicle - Euro hits two-year low as ECB holds fire

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Euro hits two-year low as ECB holds fire
Euro hits two-year low as ECB holds fire / Photo: Tomas CUESTA - AFP/File

Euro hits two-year low as ECB holds fire

The euro slumped to a near two-year low on Thursday after the European Central Bank remained vague about when it will raise interest rates in the face of soaring inflation.

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Meanwhile oil prices, whose recent surge has contributed to inflation around the globe reaching the highest levels in decades, came off the boil.

The ECB stood still in the face of record eurozone inflation, keeping its stimulus plans and rates unchanged, as the war in Ukraine cast a pall over the eurozone economy.

Meeting for the second time since the outbreak of the conflict, the bank's 25-member governing council stuck to a plan that "should" see its bond-buying scheme come to an end in the third quarter.

An interest rate hike would follow "some time" after the stimulus programme comes to an end, and any increases "will be gradual".

The decision leaves the ECB further out of step with many of its peers. Central banks such as the Bank of England, US Federal Reserve and the Bank of Canada have already triggered their first interest rate rises in response to soaring inflation.

The euro took a knock after the ECB's decision, slipping under $1.08 for the first time since May 2020, falling as low as $1.0758.

The ECB "continues to show little sign of looking to hike rates after leaving rates unchanged at their policy meeting today, while being even handed over the risks facing the eurozone economy," said market analyst Michael Hewson at CMC Markets UK.

The ECB's provided a boost for eurozone stocks, however, which moved into positive territory and ended the day higher.

- Musk Twitter bid -

Wall Street was mixed, with another major bank reporting a big fall in profits and setting aside money due to Russia's invasion of Ukraine.

Citigroup said its first quarter profits tumbled 46 percent to $4.3 billion, in a similar performance to JPMorgan Chase which reported Wednesday a sharp drop in profits and warned of downside risks from the Ukraine war and surging inflation.

Its shares nevertheless rose 2.1 percent in late morning trading.

Elsewhere on the corporate front, Tesla chief Elon Musk launched a hostile takeover bid for Twitter, offering to buy 100 percent of its stock and take it private, according to a stock exchange filing.

Musk offered $54.20 a share, but the company's share price was up by around 0.4 percent to $46.03 in late morning trading.

The reaction "appears to suggest little enthusiasm on the part of investors" said Hewson at CMC Markets.

While this may indicate they believe Musk is not serious, Hewson said the share price would likely take a hit if he is rebuffed and dumps his holding.

"Given the recent share price performance of Twitter they ought to be ripping his arm off, because it’s unlikely they will get a better offer from anybody else," he said.

Despite falling Thursday, both main oil contracts stayed firmly above the $100 per barrel mark, with fears swirling about global supply constraints over the invasion of Ukraine by Russia -- a major producer of oil and gas.

- Key figures around 1530 GMT -

New York - Dow: UP 0.4 percent at 34,701.82 points

Frankfurt - DAX: UP 0.6 percent at 14,163.8 (close)

Paris - CAC 40: UP 0.7 percent at 6,589.35 (close)

London - FTSE 100: UP 0.5 percent at 7,616.38 (close)

EURO STOXX 50: UP 0.6 percent at 3,785.46

Tokyo - Nikkei 225: UP 1.2 percent at 27,172.00 (close)

Hong Kong - Hang Seng: UP 0.7 percent at 21,518.08 (close)

Shanghai - Composite: UP 1.2 percent at 3,225.64 (close)

Brent North Sea crude: DOWN 0.9 percent at $107.85 per barrel

West Texas Intermediate: DOWN 1.1 percent at $103.13 per barrel

Euro/dollar - DOWN at $1.0803 from $1.0894 at 2100 GMT

Pound/dollar - DOWN at $1.3060 from $1.3109

Euro/pound - DOWN at 82.72 pence from 83.03 pence

Dollar/yen - UP at 125.95 from 125.59