European equity markets rallied following the European Central Bank's decision to hold interest rates steady while signaling potential rate cuts in 2024. The Euro Stoxx 50 gained 1.2% on the day.
ECB President Christine Lagarde struck a notably dovish tone, acknowledging that "the inflation outlook has improved significantly" and that "the Governing Council is open to adjusting policy as needed."
The euro weakened against the dollar, with EUR/USD falling to 1.0780 from 1.0850 pre-announcement. European government bonds rallied, with the German 10-year yield falling 8 basis points.