The euro (NYSEARCA:FXE) shot higher in the initial moments after the European Central Bank policy decision (no change) and statement, with traders seizing upon a modest change in tone surrounding the QE program.
Spot gold was down 0.3 per cent at $1,317.41 per ounce at 0405 GMT and was on track to post its third weekly decline.
A number of policymakers on the governing council favour a sudden stop to the €30bn monthly asset purchase program in the aftermath of that date, while some favour a change to the wording with respect to downside risks to the economy. The key issue is the ECB's policy guidance on the markets for what will happen after the current 30 billion Euro monthly asset purchase program expires in September.
The euro retreated as ECB President Mario Draghi, at a Frankfurt press conference, emphasized more dovish elements of the bank's monetary policy statement issued Thursday, including a commitment to maintaining rates at present and low levels if warranted.
The change is seen as a step toward the end of QE in the eurozone.
"This outlook for growth confirms our confidence that inflation will converge towards our inflation aim.over the medium term", Draghi said.
As a result, the euro fluctuated and European stocks built upon earlier gains.
France's CAC 40 index surged 1.3% to 5,254.10, its highest close since February 7.
Bonds in Europe rebounded from a wave of selling.
The US Department of Labor reported that initial jobless claims rose by 21,000 in the week ending March 3 to 231,000, exceeding forecasts of a 10,000 rise to 220,000. The ECB Chief also noted that the immediate spillover of United States import tariffs on foreign steel and aluminum are unlikely to be that big.
But how likely is a trade war?
In reaction to the rather vocal pushback against the policy proposal, Trump seems unlikely to impose a blanket import duty.
Some dealers have traded on the possibility that Trump's tariff threat was a negotiating ploy in trade talks with US neighbours.
Nonetheless, authorities in Europe and China have forcefully announced that they will respond to any new trade barriers with retaliatory measures of their own.
The U.K.'s FTSE 100 Index rose 0.6 percent.
Other major currencies posted relatively minor losses against the Dollars. In antipodean currencies, aussie/dollar and kiwi/dollar retreated to 0.7800 (-0.29%) and 0.7263 (-0.29%) respectively on the back of potential trade risks as Australia and New Zealand are highly exposed to commodity prices which would get into a bearish run if the U.S. tariff measures materialize.
This week has seen sharp swings in stocks from positive to negative as predictions the measures will not be as bad as feared were offset by news Wednesday the president's pro-trade top economics advisor Gary Cohn had resigned.
Germany's Dax and the euro both lingered in the red though as a bigger-than-expected drop in German industrial orders reinforced euro zone caution after the weekend's inconclusive Italian election. WTI crude and Brent slipped to $61.09 (-0.10%) and $64.17 (-0.26%) per barrel respectively.