ECB leaves policy unchanged: EURUSD loses grip, USD picks up


Ahead the ECB meeting, the Euro rose and was headed to its two weeks high. Yet, as the ECB leaves policy unchanged and the meeting turned dovish, Euro extended its gains further against USD and GBP. Has Mario Draghi lost his ability to talk the Euro down?

8th September, AtoZForex – The ECB decided to keep the interest rates at record lows, while left the door open for more stimulus if needed. Mario Draghi gave away a few hints about the central banks’ next move, but in overall the markets were disappointed and already had priced in the ECB’s dovish tone.

In response to the event, Lloyds Bank Commercial Banking stated that the markets expected clearer signals or more actions from the ECB. Especially, additional stimulus measures were expected. Instead, the ECB meeting was similar to that of the July meeting, while the central bank left the deposit rate at -0.4 percent. Also, the main refinancing rate was kept at 0 percent and the marginal lending facility left at 0.25 percent.

Mario Draghi has lost the ability to send Euro lower?

It was likely that the ECB could have fiddled with the QE and sent the Euro lower. Instead, Mario Draghi emphasized that the Eurozone need to implement structural changes to decline the unemployment level and improve the economies. Suggesting that the ECB president acknowledged that the ECB could have reached its limits of being effective. Nevertheless, Mario Draghi repeated that the central bank has the capacity and will to act if inflation or growth falters.

The ECB meeting turned to the dovish side and the Euro was hardly influence by Draghi’s sanguine tone. In fact, Euro extended its gains against the Pound and US dollar after the ECB leaves policy unchanged and no major moves on its QE program got announced. Indicating that the ECB President’s ability to talk the Euro down has lessened.

EURUSD loses grip, while USD picks up

Despite, the single currency extended its gains against the rivals, now Euro is giving away part of its gains. Meanwhile, USD has picked up due to a sudden spark of buying interest, which lifted the US Dollar Index (DXY) from its daily lows, now trading around 95.11. These events have sent EURUSD back to the 1.1270 band, but analysts expect that the Euro will keep its buoyancy.

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