Euro steady as ECB ends bond purchases, pound gains

NEW YORK (Reuters) - The euro held steady against the dollar on Thursday after the European Central Bank, as expected, halted new bond purchases and promised to maintain policy support for the euro zone due to risks from trade tensions, Brexit and budget woes in Italy and France.

Sterling edged higher following UK Prime Minister Theresa May's prevailing in her party's vote on her leadership the day before. It had rallied on Wednesday in anticipation as traders bet her win might allow her to negotiate more generous terms for Britain in its exit from the European Union in March.

The dollar was firm against most major currencies stemming from optimism on some progress between China and the United States to resolve their trade issues, analysts said.

"Continuing confidence and increasing caution," was how ECB President Mario Draghi at his news conference described the ECB's decision for ending the 2.6 trillion euro ($2.95 trillion), four-year-long quantitative easing program. It will reinvest cash from maturing bonds.

On the other hand, the ECB kept its primary rate target at -0.40 percent. It also marked down its outlook on regional growth.

"The euro is holding in pretty well," said Lee Ferridge, North American head of cross-asset strategy at State Street Global Markets in Boston. "That's a hopeful sign for the future."

At 2:46 p.m. (1946 GMT), the single currency was 0.03 percent higher at $1.1366. It has been trading in a range of $1.12 to $1.15 since early November.

Against the pound, it slipped 0.19 percent at 89.88 pence.

Sterling notched higher amid uncertainty on what more May, who is currently in Brussels, could get from EU leaders to improve on her Brexit proposal in a bid to achieve parliamentary approval.

On Monday, May scrapped a vote on her current plan, sending the pound to a 20-month low against the dollar and triggering a no-confidence vote on her leadership.

The sterling was up 0.21 percent at $1.2653, just below its session peak of $1.2687 and above a 20-month low of $1.2477 reached on Wednesday.

An index that tracks the greenback against the euro, sterling and four other currencies was 0.04 percent higher at 97.082.

U.S. President Donald Trump's upbeat comments on trade talks with China and Beijing's first major purchase of U.S. soybeans in months boosted the dollar.

"While not settled, sentiment has improved," Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investments in Boston, said of renewed optimism about U.S.-Sino trade relations.

(Additional reporting by Tommy Wilkes in LONDON; Editing by Jon Boyle and Phil Berlowitz)

By Richard Leong