Interest rates to stay at 'extraordinary' low levels, says Draghi

The ECB closely monitors lending in the 19 countries that share the euro because it believes that businesses are more likely to spend, hire and invest if cash is more readily available, powering the economy towards recovery and inflation towards the central bank's target of just below 2.0 percent.

Much of the early market focus, however, will remain on currency markets and the euro, which was marked 0.35% lower against the US dollar at 1.1127 overnight following comments from European Central Bank President Mario Draghi which indicated a preference for continuing the "substantial" amount of stimulus now in place to ensure the region's nascent recovery remains on track.

The comments come ahead of the ECB's June 9 meeting, where there has been speculation the bank will drop some of its dovish language amid signs of improving economic growth.

The German data follows Spanish price figures that showed inflation in the euro zone's fourth biggest economy also eased in May. This reflects the long-lasting structural problems of the Eurozone, where the regional discrepancies in economic expansion pose an existential threat to the common currency area, and the ECB's mandate is to find balanced monetary solutions allowing the Eurozone to move forward.

Draghi said prospects were getting better but more growth was needed.

European Central Bank policymakers meet next week in the Estonian capital Tallinn, with analysts hoping for clues afterwards from president Mario Draghi on the institution's plans to wind down its mass bond-buying still further.

He added that "we will support bank reorganisation, post-Brexit".

With exchanges closed in the US, United Kingdom and China for a holiday, equity markets in Europe didn't have much guidance and finished mixed for the session.

Global stocks were mixed, the dollar traded sideways and the euro slipped amid thin trading as investors weighed the latest comments from a Fed official on the path of US borrowing costs and Mario Draghi's dovish message to the European Parliament. He said that medium-term trends in inflation remained "pretty favourable".

The ECB recently reaffirmed their commitment to start raising interest rates only after the asset-purchase programme is wrapped up, but the current purchases of 60 billion euro worth of bonds per month are projected to continue till the year-end. IHS Markit, which publishes a monthly activity index, said last week that the economy is growing at a pace that would warrant tighter monetary policy if it wasn't for weakening inflation.

  • Zachary Reyes