Euro Jumps as ECB Raises Economic Forecasts

By Mike Bird Features Dow Jones Newswires

The euro rose more than 1% after the European Central Bank raised its growth forecasts Thursday, adding to the currency's rapid climb this year.

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The ECB kept interest rates and its EUR60 billion ($71.5 billion) monthly bond-buying program unchanged, but altered its forecasts for economic growth and inflation. It now says it expects the eurozone economy to grow 2.2% in 2017, up from a previous forecast of 1.9%.

The euro had already risen by 0.5% against the dollar before ECB President Mario Draghi's press conference, climbing by as much as 1% as he spoke, to as high as $1.2055.

Nonetheless, the ECB cut its inflation forecasts, with price growth of 1.2% next year now expected, down from 1.3%, which Mr. Draghi said was largely due to the recent appreciation of the euro.

Mr. Draghi referenced the unexpected strength of the euro as the main reason for the revision to inflation forecasts. The stronger currency reduces import prices, dragging down inflation during the following year.

ECB economists had expected a euro-dollar exchange rate of $1.08 this year when they made their last forecasts in June, but the euro is now at more like $1.20. The currency has appreciated by 14% against the dollar so far this year

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Eurozone government bond yields were less changed, with 10-year German bund yields actually dropping slightly, from 0.357% before the meeting began to 0.34% nearer the end.

Write to Mike Bird at Mike.Bird@wsj.com

(END) Dow Jones Newswires

September 07, 2017 09:28 ET (13:28 GMT)