Draghi hails 'solid' growth as European Central Bank keeps policy on hold

Draghi Faced Nowotny Plea to Discuss ECB Policy

The Australian dollar is lower after the U.S. dollar rallied following the European Central Bank meeting and the release of better than expected USA employment data.

LONDON, April 26 (Reuters) - The euro edged off eight-week lows on Thursday as traders readied for a European Central Bank meeting, when investors will be searching for any signals about when the bank will begin unwinding its stimulus.

Draghi told his press conference that the ECB was "cautious, tempered by unchanged optimism", that the strength of the eurozone economy will allow the bank to reach its inflation target.

But he said "careful assessment, monitoring. more information" were needed before deciding how the European Central Bank should respond, arguing that the data for now remain "consistent with a solid and broad-based expansion".

Draghi, however, remained positive about the region's economic outlook for 2017.

With the euro falling, the dollar traded near a 3-1/2-month high against a basket of currencies, bolstered by the 10-year Treasury benchmark yield breaching the three percent threshold for the first time in four years.

Draghi warned that rising protectionism was starting to pose a "more prominent" risk to the eurozone outlook after US President Donald Trump fanned fears of a global trade war. The crown fell 0.2 percent to 10.43 crowns versus the euro, and it was also down 0.2 percent against the dollar.

However, "the June meeting will be crunch time. the European Central Bank will have a better view on whether weak economic data were only a soft patch or the start of a downswing, and on whether inflation moving to 2% is still more wish than reality".

If growth shows signs of slowing that could be a reason to extend the bank's 30 billion euros ($36 billion) in bond purchases.

"What is certainly known is that the events have a profound and rapid effect on confidence, and confidence can in turn affect the growth outlook", he said. The stimulus is set to run at least through September.

Trump is widely expected to end a temporary exemption for European steel and aluminum imports from new tariffs imposed by the United States two months ago, which runs out on May 1.

"We can't know now what are going to be the direct effects of potential retaliation".

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