Rate decision of the ECB and the EUR/USD reaction

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, 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 programme in terms of size and/or duration.

  • Depo rate -0.45
  • MLF 0.25%
  • Refi 0.0%
  • QE remains at EUR 60bln per month

The EUR/USD didn’t react much at the rate decision and statement, but, when the Press Conference started and when Mr.Draghi started to talk, the pair started with the wild rollercoaster ride.

aureus invest eur-usd september 07.

On this M5 chart, you can see how the move becomes wild at the beggining and during the press conference, with several direction change. At first, the pair went up from 1.1965 to 1.2020 (1) and then returns down to 1.1935 (2). The buyers took over at the MA200/100 and push the pair up strongly to 1.2050 (3), where the sellers have took over and pushed down again to 1.1975 (4). 5th move was again up to 1.2030 where the pair calm down for a while in triangle pattern. Possible move up or down furder, based on our chart (arrows). The pair remains bullish for now, read our previous EUR/USD analysis.

What ever Mr.Draghi wanted to do with his dovish stance in the press conference (to lower the euro) he didn’t succeed, while buyers are more looking the numbers and have trust in the Euro zone recovery, then have trust in his dovish speech. In the previous 4 events, the euro was bullish 3 times.

For the official ECB statement and monetary policy  decision, please click here.

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