The European Central Bank left interest rates unchanged on Thursday and offered a modestly upbeat assessment of the euro zone economy, raising doubts among investors about further policy easing even while U.

Policymakers must remain agile, noting that the stronger euro was having a significant disinflationary effect, Bank of France Governor Francois Villeroy de Galhau said.

There’s little reason for the European Central Bank to lower interest rates further unless the economy suffers a major blow, according to Governing Council member Martins Kazaks.

European Central Bank policymakers are setting a high bar for an interest rate cut in September and they would need to see a significant deterioration in growth and inflation before backing further easing,

"At 2%, rates remain squarely to the middle of the ECB’s 1.5% to 2.5% neutral range. Uncertainty is highly elevated, however, and, if trade tensions escalate, further easing may well be required later in the year to help support business and consumer confidence." SYLVAIN BROYER, CHIEF EMEA ECONOMIST, S&P GLOBAL RATINGS:

European bonds dropped for a third day as traders continued to reduce their bets on a final European Central Bank interest-rate cut this year.

While annual inflation in the euro area hit the central bank's 2% target last month, traders widely expected a hold in July — in large part due to geopolitical volatility. The U.S. is the EU's biggest bilateral trade and investment partner and the 27-member bloc exported 503 billion euros ($590 billion) in goods to the States last year.