March 8, 2018 / 2:06 PM / 2 years ago

Euro gives up gains on ECB's subdued inflation view

LONDON, March 8 (Reuters) - The euro gave up virtually all its gains against the dollar on Thursday, turning lower after ECB President Mario Draghi said monetary policy would remain “reactive” and that measures of underlying inflation remain subdued.

Bond yields too partially erased their earlier rise, as markets interpreted Draghi’s comments as suggesting that any policy normalization would be very gradual.

The single currency fell 0.2 percent to $1.2390 following Draghi’s comments, after climbing to a session high of $1.2446 soon after the policy decision.

Euro zone bond yields also briefly hit new session highs as Draghi spoke, but then pulled back slightly. Germany’s 5-year bond yield was last up 3 bps at 0.08 percent, easing off two-week highs around 0.097 percent.

Southern European government bonds outperformed, with yields dropping 1-2 basis points on a day when better-rated peers saw their yields rise.

For a rolling highlights on the ECB comments, see (Reporting by the London Markets Team; editing by Sujata Rao)

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