Euro tumbles on ECB's weaker inflation, growth outlook

[NEW YORK] The euro tumbled against the dollar Thursday after the European Central Bank revised down its growth and inflation estimates and said it could expand its stimulus to battle deflation.

The single currency fell to US$1.1127 per euro, from US$1.1225 on Wednesday. The Japanese yen also picked up, to 133.53 per euro and 120.01 per dollar.

Saying it was still too early to determine the extent and impact of the economic fallout from China's slowdown and lower oil prices, the ECB held its benchmark "refi" rate at the current all-time low of 0.05 per cent.

But it cut its key forecasts through 2017, putting growth this year at 1.4 per cent and inflation at a bare 0.1 per cent.

ECB head Mario Draghi said that the single currency area could even see negative inflation rates in the coming months, largely due to lower oil prices, but that was likely to prove only temporary.

Mr Draghi said that the bank's quantitative easing asset purchase programme "provides sufficient flexibility in terms of adjusting the size, composition and duration," if the region's economy remains weak.

It was "intended to run until the end of September 2016, or beyond, if necessary," he added.

"The downward revisions to the ECB's forecast for inflation in 2016 imply that QE will go on longer than the current end point of September 2016," said Tom Rogers of EY Eurozone Forecast.

There was still caution over the dollar ahead of Friday's US jobs market report, which if strong could push the Federal Reserve to begin hiking interest rates.

Most analysts anticipate middling numbers that will provide little extra support for an increase.

AFP