EUR / USD whiplash as policy remains unchanged with continued dovish message

Key discussion points:

  • EUR / USD jumps then reverses as ECB provides policy guidance
  • Inflation remains below target
  • Asset purchases will remain in effect until a rate increase is required

EUR / USD tried to regain some bullish momentum as the European Central Bank leaves monetary policy unchanged, but gains quickly reversed. pair has been stuck in a downtrend since early June when the US dollar started to gain momentum, falling near the 4-month low on concerns about the economic recovery and inflationary pressures in the euro zone. While unchanged policy was widely expected, it is also seen as a slightly positive bias for the euro as there was also talk of the possibility of further easing of conditions.

One of the key observations in the press release is that rates have been near their lower limits for some time and the medium-term inflation outlook is still well below its target, despite the fact that inflation is expected. is cararately below goal in a transition period.

central bank has maintained the current pace of asset purchases to reinforce the cararate impact of its official interest rates and should hold out until it is ready to start raising rates. ECB is seen as one of the most accommodating banks in Europe, so today’s statements do not surprise markets, which largely hoped the message would not change.

Watch ECB President Christine Lagarde and Vice President Luis De Guindos explain the Governing Council’s decision during the live press conference at 1.30pm BST.

EUR / USD 1 minute chart

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– Written by Daniela Sabin Hathorn, Market Analyst

Follow Daniela on @HathornSabin

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