European Central Bank President Mario Draghi's difficult task of calming markets was laid bare on Thursday afternoon, as an initial dovish message by the ECB was quickly drowned out by talk of inflation and an end to asset purchases.
The bank held interest rates and asset purchases steady on Thursday, amid speculation that it will start to scale back its ultra-loose monetary policy in the fall. It also struck a somewhat dovish tone and insisted that it would be poised to step in should the outlook take a downward turn.
"If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the program in terms of size and/or duration," the ECB said in its policy announcement alongside its rate decision.
The euro initially dropped to $1.1489 against the dollar on the news, losing some of the gains recorded in recent weeks. The pan-European Euro Stoxx 600 index extended gains a little on the announcement and yields on the 10-year German bund also pushed lower.