Article Highlights

  • ECB raises growth outlook, keeps stimulus pledge
  • U.S. retail sales beat expectations in November
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The U.S. dollar gained against the euro on Thursday after the European Central Bank raised growth and inflation forecasts for the euro area, but stuck with its pledge to provide stimulus for as long as needed.

The ECB kept its key rates on hold and also held rigidly to its script on its intentions for next year – despite pressure from some policymakers to acknowledge explicitly the strength of the euro zone recovery and more closely follow the U.S. Federal Reserve’s tightening trend.

The euro rose to a day high of $1.186 after the bank raised its growth forecasts from this year through to 2019, before weakening back to $1.178, down 0.38 percent on the day.

ECB President Mario “Draghi is, frustratingly, on the one hand saying that the progress we have achieved and expect to achieve is contingent on continued accommodation, which doesn’t speak to a central banker that’s ready to pull the rug away from QE,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corporation in New York.

“But by the same token he is growing increasingly convinced that the recovery is broadening and more sustainable, and he’s got growing confidence that they can hit their inflation forecasts, so there is enough there to keep euro trapped in current ranges” Franulovich added.

The euro has held in a range between $1.196 and $1.172 against the greenback since mid-November.

Data on Thursday showing that U.S. retail sales increased more than expected in November also helped to boost the greenback as investors anticipate faster U.S. growth.

The dollar had weakened on Thursday after the Fed left its rate outlook for the coming years unchanged even as policymakers projected a short-term jump in U.S. economic growth from the Trump administration’s proposed tax cuts.

Some investors had expected that the Fed would indicate a faster pace of rate increases in the near term. The Fed has projected three more hikes in both 2018 and 2019.