FX round-up: Threadbare sterling ekes out gains as ECB stays put on rates, QE

Sterling enjoyed mild gains on most key crosses, excepting the US dollar, as the European Central Bank (ECB) maintained its asset-purchase programme and stayed interest rates, all as expected.

At 17:12 BST, sterling was down 0.17% to $1.2264 and up 0.21% to €1.1220. The dollar-spot index was up 0.32% to $98.237. Flat UK retail sales in September left sterling unmoved.

Early afternoon, ECB held its interest rates at 0%, the marginal lending facility at 0.25% and the deposit facility at -0.40%. The QE was stayed at €80bn a month until March 2017.

ECB president Mario Draghi said policymakers left the question of its QE programme off the table in their talks. He hinted that the programme might be extended beyond March 2017.

Draghi also said the ECB was re-examining the design of the QE programme and that policymakers would take a decision at their 8 December meeting.

IG market analyst Chris Beauchamp said that clearly euro traders thought looser fiscal policy was on its way in, with the economic bloc's currency slumping to its lowest level since July.

"The Germans might not be keen on further stimulus, but they’ll be even less keen on a stronger euro that hits exports," Beauchamp added, also noting the impact of sterling.

Sterling -- laid threadbare after UK's non-binding Brexit vote in June -- rose on the aussie, loonie, kiwi, rand and yen, as did the greenback, which made mild gains on the euro.

At about 17:37 BST, the dollar was up 0.36% to fetch €0.9146.

This, said Jasper Lawler, market analyst at CMC Markets, was the market "positioning for an extension of the QE program sooner rather than later.

"Based on the ECB's inflation forecasts, a six-month extension to September is mostly likely," he said in a statement.

OANDA senior market analyst Craig Erlam observed the euro was now just shy of earlier levels.

"This potentially reflects the view that tapering in the near term now looks extremely unlikely," Erlam said.

"The only real uncertainty now is whether the ECB will find a solution to the scarcity of bonds that is seen as satisfactory by the markets."

Meantime, stateside, investors continued to assess the likelihood of the US Federal Reserve hiking interest rates this year. December was seen as possible, but by no means a done deal.

On Thursday, the Labor Department data revealed unemployment benefits claims rose 260,000 last week, above consensus for 250,000, after spending weeks at a four-decade low.

The Federal Reserve Bank of Philadelphia showed that manufacturing activity in the region fell to 9.7 in October from 12.8 on the index in September. A print of of seven was expected.