* Euro steady after ECB hold rates, as expected
* Draghi comments seen key to sentiment
* European shares , U.S. stocks seen higher
* Brent crude near $118, gold steady at $1,680
By Richard Hubbard
London, Feb 7 The euro and shares were little
changed on Thursday after the European Central Bank left rates
steady at its monthly policy meeting as investors awaited
president Mario Draghi's views on the region's growth outlook.
U.S. stock futures pointed to modest gains when Wall Street
opens, though market participants said much depends on whether
the ECB president makes any comments on the level of the euro at
a news conference due to begin at 1330 GMT.
The euro held onto the 0.3 percent gains made before the ECB
announcement to trade around $1.3570, above this week's
low of $1.3458 plumbed but well shy of a 15-month peak of
$1.3711 set last Friday.
The currency of the 17-nation bloc has soared by 20 percent
against Japan's yen in just three months, risen 8
percent on sterling and 7 percent on the dollar,
heightening tensions among policymakers.
"Draghi has to be very careful because it's a very sensitive
time in currency markets, and investors will be looking for any
hint of the ECB's thinking on this issue," said Ned Rumpeltin,
head of G10 FX strategy at Standard Chartered Bank.
"It is probably the wisest path for him to avoid the debate
on the currency at this point in time."
At his news conference last month, Draghi read out a G20
statement on exchange rates in which members pledged to avoid
competitive devaluations. With another meeting of the group due
next week, it's likely he will stick to this line.
Draghi has also pointed out that the euro's trade-weighted
index is still down more than 10 percent from its
2009 peaks so may not yet be a significant drag on growth.
Analysts have a rule of thumb calculation that every 3
percent rise in the euro's trade weighted value has the same
drag on growth as a half point interest rate hike.
The ECB's pain threshold on the euro has also changed over
the last decade. Former President Jean-Claude Trichet used the
term "brutal move" in early 2004 when it hit a then-record high
of $1.2898, but the last time the central bank showed signs of
discomfort was in mid-2011 when it was threatening $1.50.
The ECB left its main interest rate at 0.75 percent.
Before the ECB meeting, the first foreigner to run the Bank
of England, Canadian Mark Carney, told UK lawmakers he would be
reviewing the bank's current monetary policy but said the bar
for any change was very high.
Ten-year gilt yields were 3 basis points higher
at 2.12 percent and London's FTSE 100 index eased as
Carney's comments were seen reaffirming the current policy known
as flexible inflation rate targeting as the best way forward.
At its policy meeting being held at the same time, the
central bank left rates on hold as expected and left its asset
purchase scheme unchanged at 375 billion sterling.
Spanish debt yields meanwhile eased slightly even though the
government was forced to pay more to borrow funds at a bond
sale as a growing political corruption scandal and concerns over
the economy had an impact on buyers.
Demand was still strong at the sale of 4.6 billion euros of
new debt and the yields which resulted remain well away from
European shares were choppy but traded within a narrow range
after the ECB rate decision having stabilised following sharp
losses on Wednesday. The FTSEurofirst 300 index was
down 0.2 percent while Paris's CAC-40 rose 0.2 percent
and Frankfurt's DAX was 0.35 percent higher.
"The medium and long-term positive trend is still intact,
although on the short term, we're turning 'neutral'; indexes are
very close to key support levels," said Aurel BGC chartist
Commodities markets were all trading within tight ranges,
with investors' attention firmly fixed on the currency
implications of anything the ECB's Draghi might say.
The euro often dictates gold's movements in particular, and
ahead of the meeting it had inched up to about $1,680 an ounce
"Gold is very much dependent on the outcome of the ECB. I
don't think today they will give us a clear indication whether
the euro is indeed over-valued," said Joyce Liu, an investment
analyst at Phillip Futures in Singapore.
"If they try to weaken the euro because the economy hasn't
bottomed out, then in that case, it's possible gold may go up a
Brent crude was slightly higher, edging towards $118 per
barrel ahead of the ECB meeting.
Brent has gained over the last three weeks as positive data
suggested the global economy had turned a corner, which augurs
well for fuel demand, while supply worries stemming from
tensions in the Middle East have also supported prices.