The ECB monetary policy decisions and the EUR/USD reaction
At yesterday meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) 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 continues to expect 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.
(2) As regards non-standard monetary policy measures, purchases under the asset purchase programme (APP) will continue at the current monthly pace of €60 billion until the end of December 2017. From January 2018 the net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, 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. 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 APP in terms of size and/or duration.
(3) The Eurosystem will reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary. This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.
(4) The main refinancing operations and the three-month longer-term refinancing operations will continue to be conducted as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the last reserve maintenance period of 2019.
As this funny photo shows, the euro bears surely loves Mr.Draghi lately, while his talk mostly affect the euro strongly on the downside. As we wrote before, 1.20 was already the sign for the ECB to react and to lower the euro on all cost. That’s how on yesterday decisions and press conference talk, the EUR/USD fell sharply for almost 200 pips, breaking true the all important supports and MA’s. The fall started from above the 1.1800 level, true the 1.1730 > 1.1660, closing the day far bellow daily MA100 at 1.1650. That was the sign for furder slide today when pair reached the low at 1.1586 for now. US GDP helped with better numbers as well. This green trendline at 1.1550 is the last support what I see now at this moment as the pair is in huge danger to continue this fall furder. First decent support could be at 1.1400/1.1370. Well Mr.Draghi, this one’s for you only. 🙂 Enjoy you weekend traders, I am out.