Euro Weakens as Draghi Signals Additional Stimulus Down the Road

The EUR/USD was hovering near a four-month low on Thursday after European Central Bank President Mario Draghi signaled that policymakers may extend their program of bond purchases beyond its scheduled expiration in March, but without offering a clear commitment to do so. Traders read the comment as dovish.

Draghi also made statements confirming this assessment. At his news conference, he said and “abrupt ending” to bond purchases is “unlikely,” and said a decision would be made at the governing council’s December 9 meeting.

Draghi assessed the Euro Zone’s economy by saying it is set for a continuing moderate but steady recovery,” and that the ECB may need to “ confirm the need to preserve the very substantial amount of monetary policy support that…is necessary to secure a return of inflation to levels below, but close to, 2% without undue delay.”

The biggest surprise came when Draghi said the governing council hadn’t discussed an extension to the bond buying program.

Draghi also addressed the issue of tapering its quantitative easing program soon. Earlier this month the financial markets were rocked by this news. He denied this, saying policymakers hadn’t discussed the issue.  He further added that it was “a random statement made by someone who didn’t have any clue or information about that.”

The EUR/USD initially fell to 1.0951 on the news, but recovered to trade 1.0973, down 0.00001 or 0.00%.

Gold

Gold prices were trading mostly lower at 1617 GMT, coming in at $1267.80, down $2.10 or -0.7 percent. The catalysts behind the move were a firmer U.S. Dollar and steady U.S. Treasury yields. Gold prices are in a position to close higher for week after three weeks of loses. A mixed performance by the major stock indexes may also helped to underpin the gold.

Crude oil

Crude oil confirmed its rangebound status with a steep sell-off on Thursday, just one day after the release of bullish inventories data. The selling pressure was related to profit-taking due to overbought technical conditions.

U.S. Economic News

Weekly Jobless Claims came in at 260,000, up 13,000 from the previous week. The number represented an 85^th straight week coming in below 300,000. The Philly Fed Survey came in at 9.7, below the estimate and September’s 12.8.

U.S. Dollar

U.S. Dollar futures whipsawed against a basket of currencies on Thursday, driven by Draghi’s comments and their effect on the Euro. Treasury yields were steady, helping the dollar to recover from earlier weakness.