Euro slips on ECB's cautious view, oil reverses losses

Thu Jun 2, 2016 4:22pm EDT
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By Richard Leong

NEW YORK (Reuters) - The euro declined on Thursday on the European Central Bank's cautious economic outlook, while oil prices recovered on a drop in U.S. crude inventories, erasing losses on OPEC's failure to reach a deal to set an output ceiling.

The crude market rebound lifted Wall Street and European stocks out of the red, removing the earlier sting from a 2 percent slump in Japanese shares.

U.S. and German government bond prices firmed on safe-haven bids as a possible U.S. interest rate increase and the June 23 referendum whether Britain would leave the European Union, or "Brexit," posed near-term risks that could rattle investors.

"The bigger looming issue is the Brexit question. If it comes to pass, it would help calm markets," said Matt Kaufler, portfolio manager at Federated Investors in Rochester, New York.

The ECB nudged up its inflation forecast for 2016 but predicted price growth would remain below target through 2018 as depressed energy costs have held down prices of other goods and services.

The group of the world's major oil exporters failed to come to an output policy, with Iran insisting on the right to ramp up production.

Disappointed by OPEC's inability to clinch a deal addressing the global supply glut and sluggish demand, traders initially sold oil futures. Buying later emerged in reaction to government data showing a drop in U.S. oil inventories.

U.S. crude futures settled up 16 cents or 0.33 percent at $49.17 a barrel, while Brent oil futures settled up 32 cents or 0.64 percent at $50.04.   Continued...

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