Investing.com - The U.S. dollar rose to three-month highs against its rivals on Thursday amid a slump in the euro after the European Central Bank sounded the alarm on euro-area growth and pushed back its expectations for a rate hike.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.68% to 97.45.
EUR/USD fell 0.77% to $1.1217 after the ECB pushed back its expectations for a rate hike to at least the end of the year, slashed its growth target for 2019 to 1.1% from 1.7% and detailed new stimulus measures.
In the press conference that followed the ECB's unchanged decision on rates, president Mario Draghi delivered a downbeat of assessment of the euro area economy, saying a "sizeable moderation" in growth would continue into the current year.
The ECB will begin a new series of quarterly targeted longer-term refinancing operations, "TLTROs," in September 2019. They'll run through March 2021, each with a maturity of two years, and be linked to the refinancing rate.
The dovish policy action and remarks from the ECB led some to speculate the central bank may not raise rates until at least 2020.
"In our view, any rate increase by the ECB is off the table for the next 24 months and possibly longer than that," said ADA Research. "Given the high number of TLTRO auctions announced, the need for quantitative easing has been reduced, but has not disappeared completely as the two measures are not perfectly substitutable now that there are tighter limits on banks' holdings of local bonds."
"Also, the new TLTROs are unlikely to have an impact on Italy in the short term, as companies are still on balance repaying debt."
GBP/USD slumped 0.61% to $1.3089 amid fears that the Brexit deadlock will continue after the EU rejected the U.K.'s latest proposals on the Irish backstop.
Britain's Attorney General Geoffrey Cox in Brussels presented the proposals on Tuesday, but they were rejected. The EU has given Cox until Friday to submit revised proposals, according to Reuters, citing comments from EU diplomats.
But many analysts have said the March 29 Brexit deadline is likely to be delayed as Prime Minister Theresa May is unlikely to win concessions from the EU that U.K. lawmakers demand in order to vote in favor of her withdrawal deal on March 12.
"We doubt May can achieve victory at this stage … A two-to three-month extension of Article 50 appears likely with May securing passage of the deal by early April," Bruce Kasman, managing director and head of economic research at J.P.Morgan, said in a note.
USD/JPY fell 0.19% to Y111.54, while USD/CAD gained 0.11% to C$1.3455.