Euro gains as ECB holds, Fed fears keep world shares weak

Thu Jun 6, 2013 8:46am EDT
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By Richard Hubbard

LONDON (Reuters) - The European Central Bank's decision to leave rates unchanged lifted the euro to near a four week high on Thursday, but uncertainty over the U.S. Federal Reserve's next move kept world share markets on edge.

The euro inched up to $1.3123 after the announcement, just shy of a four-week high of $1.3131 struck earlier, German Bund futures inched lower and European shares were little changed, holding on modest gains of 0.3 percent.

As widely expected, the ECB kept its interest rate at a record low 0.5 percent deciding to waits for signs of the economic turnaround it has predicted for the region in the second half of the year.

Investors will now shift their focus to President Mario Draghi's news conference for clarity on the central bank current view of the currency bloc's economic prospects and its attitude to future rate cuts.

"The expectation they (the ECB) would do something today was quite low, but many are quite divided about what they are going to do going forward so the press conference is still anticipated with some eagerness," said Jan von Gerich, chief strategist for developed markets at Nordea.

Earlier the Bank of England also chose to leaves its loose monetary policy unchanged at the conclusion of the final policy meeting under current Governor Mervyn King after recent data pointed to a tentative pick-up in activity.

With no surprises from either central bank, the markets attention is now expected to switch to Friday's U.S. non-farm payrolls report which could determine when the Federal Reserve begins tapering its bond-buying.

JOBS KEY   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett