Mario Blascak, PhD
Independent Analyst
While I expected a very firm stance at the press conference following the ECB Governing Council meeting from its President Mario Draghi, the opposite was true.
Coming in front of the journalists gathered for the press conference at ECB’s building at Sonnemannstrasse 22 (meaning the street of the sunny man in German), he was wearing the purple tie. I expected to wear the red color, indicating that he will be hard on the Euro´s recent strength that undermines the ECB´s main target-inflation.
Given the expectations of Draghi jawboning the Euro lower, I completely failed in my prediction as Draghi decided to opt for a different style of communication. Instead of firm stance and clear view, he seemed to be lost… lost in his own words. And he admitted that himself.
While there were many questions concerning the recent strength of Euro from rather a low number of journalist participating, at least compared to times when I was regular ECB press conference participant a few years ago, there was no straightforward answer of Draghi style that we know from previous press conferences for years. Draghi opted to hide his comments on the recent strength of Euro behind secrets of agreement done back in October of last year on the communication of officials with market participant agreed with the IMF. So the US Treasury Secretary Mnuchin has stolen the sunshine from Draghi yesterday while saying that the US supports weak Dollar as it is good for its growth and trade.
I could still feel the heat of the discussion within the Governing Council that has burned Draghi´s ability to influence markets while skillfully operating between the gaps and pitfalls of not saying things directly. In fact, the EUR/USD rose during the press conference up to $1.2538 trading up 1.2% on a day. So instead of talking down, Draghi´s indirect blaming of the US officials for breaching the communication agreements just did not work.
With Euro´s recent rise the ECB is left to prolong or extend its asset purchasing to reach its inflation target, as Draghi ruled out any chances of interest rate hike this year.
And that is playing well for the EUR/USD as it has managed to breach even its current steep bullish trend on the upside.
EUR/USD 15-minute chart
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