Euro heads for worst week in 19 months on ECB's cautious stance

EUR  CHF

The Bank of Japan on Friday chose to stick to its ultra-easy monetary policy, another contrast with the Federal Reserve's decision Wednesday to raise its benchmark interest rate and set the stage for more increases this year and next.

US Retail Sales and Unemployment Claims - Expectations - Retail sales are expected to rise 0.4% in May, following a 0.2% increase in April and a 0.7% gain in March. The S&P 500 index rose 6.86 points, or 0.2 percent, to 2,782.49.

The ECB's bond buys - now set at €30 billion ($35 billion) a month - and ultra-low interest rates are created to stoke growth in the 19-nation single currency area and power inflation to the bank's target of just below 2 percent.

"We made a decision to keep the key European Central Bank interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path", Draghi said.

With no major economic news in the United Kingdom over the next few trading sessions, all eyes early next week will turn to Thursday's Bank of England meeting.

"Fed Chair Jerome Powell underscored his own satisfaction with the recovery in his remarks on Wednesday, saying the economy was in "great shape" and even going so far as to hint that he no longer feels constrained by the Janet Yellen-era fear of slipping back to zero interest rates". Higher rates can stave off inflation, but they can also hinder economic growth.

Interest rates remained unchanged at the ECB's June meeting. European stocks surged, but the relatively stronger U.S. dollar weighed on commodities and brought a more muted reaction from USA investors.

Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75 percentage points a year to the average 2.25% annual growth rate.

Stocks from developing economies continued their struggles, which have been compiling since the spring.

Retail sales jumped in May after shoppers spent more at home and garden stores, gas stations and restaurants.

On Thursday, the data for the US economy were almost uniformly encouraging. This is an indication of an acceleration in economic growth in the second quarter.

"I think it´s more just, we are just looking at the economy and what does it need and how do we sustain the expansion, keep the labor market strong and try to keep inflation near 2 percent". It gave up gains from the prior day, when the Federal Reserve surprised some investors by speeding up its timetable for rate increases.

CURRENCIES: The dollar fell to 110.34 Japanese yen from 110.55 yen late Thursday.

Germany's DAX .GDAXI and France's CAC40 .FCHI led the European stocks rebound as the euro tumbled back under $1.17 from well over $1.18 EUR=EBS.

OIL: Benchmark U.S. crude rose 5 cents to $66.94 per barrel in electronic trading on the New York Mercantile Exchange.

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