The euro has gained ground on Thursday afternoon after comments from European Central Bank (ECB) president Mario Draghi on the strength of the single currency.
ECB officials had earlier agreed to keep the Bank's main policy settings on hold: the main refinancing rate at 0% and net monthly asset purchases of €30bn until September - "or beyond, if necessary".
Dollar weakness criticised
In the press conference that followed, Draghi was more candid, taking a sideways swipe at the US for talking the dollar down after Steven Mnuchin (left) said in his address at Davos on Wednesday that the US was happy with a weaker dollar.
Draghi, without ever directly naming either Mnuchin or the US, lamented on the breaking of an agreement between leading monetary authorities on talking down currencies.
"The riposte will be that this is just the pot calling the kettle black given the ECB negative interest rate policy," says Claus Vistesen at Pantheon Macroeconomics.
While Draghi retained the view that current policy settings were appropriate given the outlook for inflation, he said the main risk to growth was euro appreciation, which would need to be "monitored".
He added, however, that growth in the eurozone had taken a stronger turn than expected and concluded that "by and large, the risks to growth are balanced".
Timothy Graf at State Street Global Markets, says: "Draghi has done enough to keep euro bulls happy in not pushing back too much against the recent strength in the single currency.
"So long as the rate of appreciation remains well contained, it seems like the central bank is willing to live with euro strength as a consequence of the success of its past easing efforts.
"The message that the ECB will be slow to remove accommodation remains clear and the inclusion of language about the volatility of the euro acknowledges what has become an overwhelmingly consensus euro appreciation bias."
David Lamb at Fexco agrees: "By reaffirming his commitment to keeping eurozone interest rates lower for longer, the clear – if undeclared – aim of Draghi’s dovish press conference was to keep the euro in check and prevent a strong single currency from hurting Europe’s export boom."
The ECB has given few clues about the ending of the asset purchase programme or timing of the first rate increase. Inflation at 1.4% remains well below the central bank's 2% target rate, and Draghi has previously said policy should remain accommodative until the target rate is reached.
"As expected, Draghi provided limited guidance on the future of the ECB’s bond buying programme at its first press conference of 2018," says Shilen Shah at Investec Wealth & Investment. "Economic activity in the eurozone remains above previous forecasts, however the underlying picture for inflation remains somewhat tepid."
Brendan Lardner at State Street Global Advisors says: "The ECB will want to see further dynamism in the economic expansion and a clear build up in inflation before it follows suit on a more hawkish message and a change of path. For now the ECB is still buying bonds even if it’s less of it."
Some, however, believe that Draghi and the ECB will continue to target euro appreciation in the coming months and this could mean an extension of its loose monetary policy stance rather than policy tightening.
"We would not be surprised if ECB officials start a dovish communication wave in the coming weeks," says Carsten Brzeski at ING.
"If markets get ahead of themselves, chances of another extension of quantitative easing rather than an early end are increasing."
Indeed, even though the ECB's message was clouded, euro bulls gathered to drive the single currency higher.
It climbed 0.77% to $1.2503 versus the dollar and was 0.24% higher against the yen at Y135.85. Sterling fell 0.38% to €1.1436.