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The ECB has left its monetary policy unchanged

On Wednesday the 7th of September, the US dollar fell across the board during the European session. The biggest growers were the euro (+0.57%), pound (+0.40%), and franc (+0.36%). The euro, of its own accord, hit the 1.1994 mark before the announcement of the ECB decision. Markets weren’t expecting a change in monetary policy from the ECB. Now they await Mario Draghi’s press conference.

The Eurozone’s revised GDP figures for the second quarter could have triggered a surge on the euro. The year on year value was revised upwards from 2.2% to 2.3%. This is the strongest growth the Eurozone has seen since the first quarter of 2011. Market participants may have thought that, given the pace of the Eurozone’s economic growth, the ECB would upgrade their forecasts for the second half of this year and for 2018 at today’s meeting.

Following the meeting, the ECB decided to maintain the key interest rate at 0%. The deposit rate was kept at -0.4%, while the margin rate stayed at 0.25%. These decisions were in line with market expectations.

The ECB also decided to maintain its asset purchasing program (as part of their quantitative easing program) at its current level of 60bn EUR a month until December this year. They didn’t rule out the possibility of extending the program and changing the volume of assets they would purchase should the need arise. The euro reacted to this with a 30-pip slide to 1.1963.

The pound/dollar pair has risen to 1.3103. This growth was brought about by a general weakening of the dollar and a reduction in US bond yields. The price is currently hovering around the intermediate resistance. If the dollar’s slide gathers pace after Mario Draghi’s press conference, buyers will move towards 1.3160, while the euro bulls will head towards 1.2050.


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