Markets head into the ECB economic policy decision with high expectations, and as expected, Draghi delivered: he shocked the financial boards by cutting the main benchmark down to 0.0% from previous 0.5%, while also expanded the monthly purchases programmed to €80 billion starting in April, aimed to run as long as required.
Additionally, the ECB cut its deposit rate as expected by 10bp, down to -0.40%. Indeed, he took out all the heavy armor all in once, leading to a decline in the EUR/USD pair to 1.0835.
Draghi's speech sent the pair even lower, to 1.0821, with quite dovish comments and downgrades of inflation and growth forecast, but things went wild after, in the Q&A, he said that there's no reason to lower rates further. The EUR/USD soared to 1.1114, but retreated back towards the 1.1050 region as the press conference went on. Wild stuff going on around the market right now.
View the Live chart of the EUR/USD
Wall Street opened barely higher, erasing pre opening gains as the market changed direction violently, while European shares gave back most of its early gains, and the EUR/USD is now back above 1.1100.
Market has chosen to keep selling the greenback, and bottom line, started to price in the next on-hold stance in rates even before the boatload of announcement measures reached the cables. Maybe a bit early to talk about what's next as the dust has not yet settled, the EUR/USD pair seems poised to continue advancing, ahead of next week FED's meeting.
The immediate target, as long as pullbacks towards 1.1050/80 attract buyers, comes at 1.1165, the 61.8% retracement of the latest daily decline, whilst beyond it, 1.1250 comes next. Below 1.1050 on the other hand, the pair will back to its latest range, and get into neutral mode for the rest of the week.
Latest updates on the EUR/USD Forecast
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