European Central Bank calls halt to quantitative easing, despite 'soft' euro

Drama Over?       Italian two-year yields though not back to pre-crisis levels are much lower than in late May

The bank said after a policy meeting of its 25-member governing council that the stimulus program's bond purchases would be reduced to 15 billion euros ($17.7 billion) a month - from the current 30 billion euros - from October.

The U.S. dollar edged lower against the Japanese yen on Friday, as President Donald Trump announced hefty tariffs on $50 billion of Chinese imports and Beijing threatened to respond in kind, raising tensions between the world's two largest economies.

The euro was 0.35 percent higher at $1.1608.

The outlook for the Euro US Dollar (EUR/USD) exchange rate is now rather mixed, with the imminent rate decision liable to make or break demand depending on the revealed sentiment of the central bank. With market pricing for four hikes jumping to close to a 50%, we now await any surprises from the European Central Bank to see the next trend in EUR/USD.

This development occurred in the wake of a decision made by the European Central Bank to keep interest rates at record lows into 2019 while simultaneously moving to end its massive bond purchase scheme which was previously implemented as part of its anti-crisis measures. Short term rate forecasts were shifted marginally higher, with the median dot for this year indicating two more rate increases were on the cards, suggesting that the central bank is on course to hike again in September and then again in December.

Draghi said there would be no prospect of an increase in the ECB's key lending rate - now 0.0% - until next summer at the earliest. US officials say the tariff hike targets goods that might benefit from Chinese theft of technology or pressure on foreign companies to hand it over in exchange for market access. The S&P 500 index rose 6.86 points, or 0.2 percent, to 2,782.49.

Trump Kim summit: North Korea sets out its Singapore agenda
Regarding the joint exercises, Kang only said at the press conference, "This is an issue that involves the [South] Korea-U.S. alliance".

Japan's Nikkei average closed up 0.5 percent and Australian shares ended 1.3 percent higher.

Italy's new populist government is a coalition between the anti-establishment 5-Star Movement and the anti-immigration League.

The European Central Bank has taken an unnecessary gamble with extended forward guidance and plans to end quantitative easing according to a number of industry commentators.

"I think the biggest concern at the moment, more than talk about trade, is the tightening of monetary conditions in emerging markets caused by a stronger dollar", said Michael Hewson, chief markets analyst at CMC Markets in London, noting the Federal Reserve's forecast for a total of four interest rate rises in 2018.

Oil prices were down, facing pressure from evidence of rising USA output and uncertainty over supply, before a meeting next week of the world's largest exporters.

ENERGY: Benchmark U.S. crude added 23 cents to $66.87 per barrel in electronic trading on the New York Mercantile Exchange.

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