Mario Draghi is one of the guests of today’s European Central Bank conference in Frankfurt where he delivered a speech on monetary policy and economic recovery in the euro area. Dovish mood of the President of the ECB caused a strong depreciation on the EUR.
“A reassessment of the monetary policy stance is not a certainty”- Draghi denies QE collapse.
Since March ECB meeting, bankers are doing a great deal to cut market expectations of rolling back quantitative loosening. Today certainly has succeeded the president of the institution who during the conference today presented strong dove rhetoric:
“So far, we do not see enough reasons for us to adjust the earlier assessment of inflation forecasts – which are still dependent on the development of monetary policy. Before we make any changes to PolMon – interest rates, asset purchases, and pre-orders – we need to be sure that inflation in the medium term will reach our target and stay there even if monetary policy conditions are no longer so accommodative“, Draghi said.
Below are some other relevant details from the President of the ECB:
- Monetary policy works
- It is too early to repel inflationary success
- Economic forecasts are gradually improving
- It is difficult to determine how quickly lower unemployment will support the growth rate of salaries
- The ECB does not change its overtaking guidelines – it is not possible to wind down the QE
During the same conference also the chief economist of the central bank – Praet had a speech. In his view, interest rates will be maintained at current or even lower levels long after the quantitative loosening program has been completed.
European currency down – strong falls on the most popular pairs
Today’s reaction to the Euro clearly shows that even the irrelevant at first sight appearances of central bankers are able to move currencies more aggressively. The EUR/USD weakened by about 50 pips, failing to test the minima of the last two days around 1.0634:
Similarly lost EUR/GBP. In this case the depreciation was stopped on PP S1 and 61.8% of the Fibonacci abolition. Actually the price bounces back from the second level, trying to work out at least some of the losses.
The mirrored reaction was also on EUR/JPY:
