European Central Bank hints at more stimulus as global economy outlook dims

Weekly chart for EUR USD

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required", Draghi told the ECB's annual conference in Sintra, Portugal.

Trump responded Tuesday morning with a tweet criticizing the European Central Bank and China, who he said "have been getting away with this for years".

Meanwhile, the U.S. Federal Reserve, headed by Jerome Powell, met on interest rates and is widely expected to signal the coming of lower interest rates.

Last month, the U.S. Treasury put Germany, Ireland and Italy on a watch list for currency manipulation, one of the measures it uses to assess whether countries are taking advantage of the trade.

Draghi has often said the European Central Bank does not target a currency level, even if the exchange rate is an important factor for policy.

Ireland, where 28pc of exports go to the US, would be hit much harder than any other country by the imposition of USA tariffs, according to a recent study by the International Monetary Fund.

Rate cuts and monetary stimulus are aimed at loosening credit for businesses and consumers and at the same time can send a currency's exchange rate lower.

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Donald Trump traded blows with Mario Draghi yesterday in an extraordinary war of words over currency manipulation.

The economy was on the president's mind as he prepares to formally launch his re-election bid in Florida this evening and as the Federal Reserve Board is set to meet to discuss an interest rate cut for the United States.

Trump has sought to influence the Fed to cut rates. There is also no clarity on the terms of Britain's planned departure from the European Union.

At the moment, the pair is gaining 0.11% at 1.1205 and a breakout of 1.1347 (high Jun.7) would target 1.1354 (200-day SMA) en route to 1.1448 (monthly high Mar.20).

Currently, the ECB is charging banks 0.4% to keep their funds.

It's the latest dovish comment from the Governing Council, as it grapples with an economic slowdown and an inflation rate that remains below its goal.

The renewed dovish stance from the ECB has now become the nearly exclusive driver for the price action around the European currency, relegating to a secondary role the broad risk-appetite trends, USD-dynamics and trade tensions. Central bank actions have wide-ranging impact on consumer pocketbooks and the finances of banks, companies and governments. Stimulus can also push up the prices of assets such as stocks and bonds.

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