For nearly two weeks the largest portals and financial media did not talked about anything else, but the upcoming conference of the European Central Bank. The investors, banks and individual traders speculated what direction will take the bank’s president , Mario Draghi , and how it will affect the euro and its position in relation to other currencies.

Although forecasts were really varied, finally we heard information reproduced so many times – the ECB has not taken any decisions and moves that would cause any changes to current monetary policy. In an official press release “Monetary policy decisions” we read:

“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 0.25%, 0.75% and 0.00% respectively. Factors explaining these decisions were discussed at a press conference with the ECB President. “

Many people, however, are concerned about the current inflation in the euro zone – according to the latest data published last week there was an  year-on –year inflation fall to 0.7%. The ECB acknowledged, however, that cutting interest rates to fight inflation is a move not worthy of any attention .

First of all, this would raise inflation up only by 0.15 percentage points. Secondly, it would not affect other short-term problem which is currently experiencing the ECB – liquidity.

During the press conference and Q&A (question and answer session) Mario Draghi said that the European Central Bank is ready to collect more data if needed – it was a clear confirmation that no changes in the bank’s policy will occur today . It was enough for the euro to took off.

During the Q&A there was a lot of questions regarding the purchase of the bonds under the SMP. Draghi said, this is one of those instruments that would improve liquidity – but this was not the subject of debate in the Governing Council this month.

Pressed to the wall Draghi, who did not want to talk too much about inflation, finally admitted that its low level over a longer period of time is risky , and that cannot be ignored . He added that the current disinflationary trends will drive down the price of food and energy and the risk of deflation will not occur.

At the end, the ECB president once again confirmed what some predicted earlier – the Governing Council must focus on gathering additional information and then be able to take any decisions on potential changes in the monetary policy of the EU.

What was the market reaction? Looking at the EUR/USD H4 chart, we see a large uncertainty since practically the first days of February. Candles with extremely short bodies and very long wicks were in consolidation. H4 candle opened today (12:00) at the close of the previous candle and rapidly climbed to the top finally reaching the level of 1.36010 – last time price was in that area in last days of January.

Moving to even smaller TF we see that the initial “euphoria” has passed. The market – which did not here adverse information coming from Frankfurt – rallied up rapidly just for half an hour . Now we see stabilization at current levels.

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