Investing.com - The euro was lower against the dollar on Thursday after the European Central Bank downgraded its inflation forecast for the next three years, but also tweaked its guidance on rates, dropping a pledge to cut rates again if needed.
EUR/USD was trading at 1.1219 by 09.17 AM ET, off 0.32% for the day after initially touching lows of 1.1196.
The ECB cuts its forecast for inflation this year to 1.5%, down from 1.7% in March. The bank also downgraded its forecasts for 2018 and 2019 to 1.3% and 1.6% respectively.
ECB chief Mario Draghi said the cuts were mainly due to lower oil prices.
The central bank raised its growth forecasts for the next few years, saying it now expects gross domestic product to rise by 1.9% this year, up from 1.8% expected back in March.
Draghi said risks to the growth outlook are now “broadly balanced”, dropping the ECB’s previous warning that risks were to the downside.
He added that the euro zone recovery is enjoying “stronger momentum”, and is growing at a “somewhat faster pace than previously expected”.
The ECB left its interest rates unchanged earlier on Thursday and dropped its guidance that interest rates may be cut again.
The ECB kept its rate on bank overnight deposits, which is currently its primary interest rate tool, at -0.40%.
The main refinancing rate was unchanged at zero while the rate on the marginal lending facility, or emergency overnight borrowing rate for banks, stayed at 0.25%.
The ECB said that it expects policy rates to remain “at present” for an extended period of time, and well past the horizon of the net asset purchases.
In previous statements the ECB said it expected policy rates to remain “at present or lower levels” for an extended period.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.31% to 96.97, pulling away from Wednesday’s seven-month nadir of 96.45.
Markets remained cautious ahead of former FBI Director James Comey's testimony to a Senate committee later on Thursday.
In written testimony released on Wednesday, Comey said that President Donald Trump asked him to drop an investigation of former National Security Adviser Michael Flynn as part of a probe into Russia’s alleged involvement in the U.S. presidential election.
Investors are fearful that the Trump administration may be further damaged by any revelations that could emerge during the testimony, which could dampen already flagging momentum for the White House economic agenda.