Euro slightly higher on ECB announcement

The euro moved up versus the dollar and has held a near two-month high as markets celebrated the European Central Bank’s plan to tackle the region’s debt crisis.

The ECB president Mario Draghi, committed to do whatever it takes to defend the euro, has announced a new and potentially unlimited bond-buying programme yesterday aimed at lowering painfully high borrowing costs for stressed member states.

Mr Draghi announced that the ECB would only help countries that signed up to and implemented strict policy conditions, but the news still gave investors confidence that the ECB has finally taken a big step towards stemming the region’s debt woes.

“The ECB’s actions afford time, allowing risk appetite to stage a comeback for now,” said Vincent Chaigneau, a strategist at Société Génerale.

“Mr Draghi has won a battle, but cannot win the euro area crisis war by himself. The hardest task of all – getting governments to drop posturing in return for leadership and deep reforms – still awaits us.”

“While positive for European assets, it is quantitative easing or does imply that the ECB is now in a place where it will potentially do a lot of quantitative easing,” Mr Gibbs said, adding that the ECB’s balance sheet could expand due to the bond-buying programme.

“That’s not bullish for the euro,” he said, adding that the euro could start to be capped relatively soon especially on some of the crosses but also against the dollar.

The dollar moved slightly up 0.1 per cent to 78.9 2. With the yen evening out after sliding yesterday, when stronger-than-expected data on US private-sector employment triggered a rise in Treasury yields and helped drag the Japanese currency lower versus the dollar.