The Governing Council of the European Central Bank (ECB) decided at Thursday's meeting held here that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05 percent, 0.30 percent and -0.20 percent respectively.
President of ECB Mario Draghi said the decision was based on the Governing Council's regular economic and monetary analyses, and in line with the forward guidance. "As regards non-standard monetary policy measures, the asset purchases are proceeding smoothly and continue to have a favorable impact on the cost and availability of credit for firms and households," said Draghi at a press conference held after the meeting.
He said that the degree of monetary policy accommodation will need to be "re-examined" at the December monetary policy meeting as euro area domestic demand remains resilient, concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in financial and commodity markets continue to signal downside risks to the outlook for growth and inflation.
After the ECB held policy steady as widely expected, central bank chief Mario Draghi told a news conference that ECB policymakers were "open to the full menu of monetary policy" to stoke the euro zone economy as needed.
The euro marked its largest one-day percentage drop against the dollar in nine months on Thursday.The common currency gained 0.1 percent to $1.1116 on Friday, after earlier falling to a two-month nadir of $1.1072.
"When (ECB executive board member Benoit) Coeure said in May that the ECB could expand its QE, the euro fell below $1.10. But what's different now from that time is the U.S. monetary policy outlook," said Minori Uchida, chief currency strategist at the Bank of Tokyo-Mitsubishi UFJ.
"While Fed officials are talking about the possibility of a rate hike in December, whether it is really possible will be a focus next week," he said.
The Fed will meet on Tuesday and Wednesday next week, after its policymakers opted to hold interest rates steady last month, amid concerns that a slowing global economy, particularly in China, could pose risks to the U.S. economic outlook.
Sean Callow, senior strategist at Westpac in Sydney, said it is "surprising" that markets are still pricing in a 30 percent chance that the Fed will hike by December.
"How likely is it that the Fed will be optimistic enough about the emerging market outlook that worried them in September to raise rates in December?" Callow wrote in a note to clients on Friday.
The euro's plunge helped lift the dollar index to a one-month high. After rising as high as 96.579 in early Asian trade, it was last holding at 96.308 .DXY, up 1.9 percent for the week.
The dollar was also steady against the yen at 120.69 yen, after touching a one-month high of 120.99 yen earlier.
Crude oil prices edged up, taking heart from the improved risk sentiment but still pressured by concern about high U.S. crude inventories and the stronger dollar.
Brent LCOc1 added 0.8 percent to $48.44 a barrel, but was on track for a weekly loss of 4 percent. U.S. crude CLc1 added 0.5 percent to $45.60 but was down 3.5 percent for the week.
The stronger greenback also weighed on spot gold prices. Gold XAU was last trading at $1,168.4 an ounce after touching a nine-day low of $1,162.50 overnight, and was down 0.8 percent for the week.
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