NO ACTION: The European Central Bank made a decision to leave its key interest rates unchanged.
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With only six months to go until the scheduled end of QE, the European Central Bank president needs to weigh signs that the region’s recovery is losing momentum against increasing concern about asset scarcity.
Follow the live video coverage and live blog of the decision at 11:45 GMT and Draghi’s press conference which commences at 12:30.
– EUR/USD took a ride, spiking initally on the rate decision and then again during the press conference.
“There was nothing in or between the lines which made us change our mind on what’s coming: We expect the European Central Bank to announce the extension of the asset purchase programme by at least six months in December”, Nordea said. “In the meantime, Draghi struggled manfully not to raise expectations of the inevitable”.
Bond prices fell. The yield on the 10-year Treasury note rose to 1.59 percent.
“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”, it said in a statement.
The biggest statement coming from President Draghi was his statement that the European Central Bank has tasked committees to evaluate stimulus options for further stimulus, despite saying that no additional stimulus is necessary right now. “The committees have a full mandate”. You have now viewed your allowance of free articles. An extension of QE beyond the current end-date of March 2017 was on the cards, as well as other tweaks to their bond-buying program. The stock added $3.04 to $17.27.
EUR/USD reaches a high of 1.1328 so far but is unable to hold onto gains. European Central Bank forecasts for growth were downgraded for 2017 and 2018 while the 2018 inflation forecast remained steady.
“We got the impression that the ECB Governing Council is satisfied with the effectiveness of its current monetary policy stance”, said Thomas Kobel, economist at SEB. So far, economic data do not suggest a major impact.
Growth in the region slowed to 0.3 percent in the second quarter after the economy expanded 0.5 percent in the three months through March.
The yen edged up 0.2 percent against the dollar to 101.62 yen, clinging to gains of nearly 3 percent made in the last four days, after a Bank of Japan deputy governor gave few fresh clues on whether the central bank will expand its monetary stimulus this month. A purchasing-managers survey by IHS Markit signaled economic activity in the 19-nation bloc was at its weakest in 19 months.
After ECB chief Mario Draghi said the bank had not even discussed an extension of quantitative easing, the euro gained more ground, hitting a two-week high of $1.1328.
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‘The economic recovery in the euro area is expected to be dampened by still subdued foreign demand, partly related to the uncertainties following the United Kingdom referendum outcome, the necessary balance sheet adjustments in a number of sectors and a sluggish pace of implementation of structural reforms, ‘ he said. It has also offered ultra-cheap loans to banks, and offered unlimited amounts of short-term credit against collateral.
