ECB, BoE easing signals send shares and bonds higher

Thu Jul 4, 2013 1:02pm EDT
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By Richard Hubbard

LONDON (Reuters) - Clear signals of looser policy ahead from central banks in the UK and Europe on Thursday sent the euro to a five-week low, lifted bond prices and gave a boost to share markets.

The statements by the European Central Bank and the Bank of England were aimed at supporting their economies in the face of a withdrawal by the U.S. Federal Reserve from its money-printing program.

"Both the ECB and the Bank of England are trying to offset the changes the Fed is seen making," said Ned Rumpeltin, head of G10 FX strategy at Standard Chartered.

The diverging policy outlook on either side of the Atlantic sent the euro down 1 percent to $1.2883, German 10-year bond yields to a two-week low and gave European shares their best day in 11 months .FREU3.

More sharp moves could follow on Friday if U.S. jobs data for June boosts expectations of an early start to the Fed's plan to reduce its $85 billion a month of bond purchases. ECONUS

The ECB and the Bank of England left their key interest rates unchanged at regular monthly policy meetings amid evidence of a fragile recovery in their economies. However, in a big break with tradition, both banks offered guidance on the rate outlook.

ECB President Mario Draghi said interest rates in the currency bloc would stay where they are for an extended period or even fall.

"The Governing Council expects the key ECB rates to remain at present or lower levels for an extended period of time," Draghi told a news conference.   Continued...

An employee of the Tokyo Stock Exchange (TSE) works at the bourse in Tokyo June 13, 2013. REUTERS/Toru Hanai