Gold Volatility Higher After ECB Lack of Updates

Ray Dalio

The dollar continued its advance against the euro during the overseas trading session as Asian and European traders deliberated over European Central Bank President Mario Draghi's comments made at Thursday's press conference. Its current quantitative easing (QE) programme expires in March 2017, and there have already been hints that it might be extended.

MILAN, Oct 20 (Reuters) - European shares fell on Thursday after the European Central Bank (ECB) kept rates steady as expected, while a clutch of profit warnings from companies also weighed on the market.

Draghi said that plans to taper, or reduce, had not been discussed at the council's meeting this morning, disappointing those who thought the central bank was looking to replace QE with more effective stimulus measures once they expire in March.

The purchases pump new money into the financial system.

Euro zone inflation was confirmed at 0.4% in September, the region's official statistics office Eurostat said last week, a modest increase from the previous months but still significantly shy of the Bank's "just below 2%" target.

The movement in euro suggest that markets do potentially believe that the bank will issue additional policy to boost low inflation and slow growth.

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The future of the ECB's bond-purchase program has garnered a lot of market attention and influencing gold prices; some commodity analyst noted that rumors and speculation about possible tapering helped push the market through key technical support levels at the start of the month. Agains t this backdrop, an announcement of immediate tapering would be seen as some form of monetary tightening coming at the wrong moment.

"We also have a slightly firmer dollar on our hands, and I suspect the drop in the euro-dollar rate is as much to do with that as anything else", said Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd in Sydney. That leaves traders waiting until at least December for news about policy changes.

Many analysts think more stimulus is needed as growth and inflation remain lackluster in the eurozone, AFP added.

The Euro US Dollar exchange rate continues to be pressured by increasing bets that the Federal Reserve will hike interest rates in December.

Draghi said the eurozone economy is continuing to post a "moderate recovery" and inflation will continue to rise in the next couple of months. The 2017 forecast stayed unchanged at 1.2% while the forecast for 2018 was 1.4% versus 1.5% predicted three months earlier.