|

ECB Minutes show Dovish Draghi is in full control - 3 takes

  • The ECB Meeting Minutes reiterated the dovish points in the rate decision.
  • The minutes contradict reports about an earlier hike.
  • The EUR/USD receives no support from the data.

The European Central Bank released its Meeting Minutes from the June 14th meeting that sent the Euro tumbling down. The ECB announced the tapering down and end of QE but also announced a pledge to keep interest rates at current levels "through the summer of 2019". ECB President Mario Draghi was very dovish back then. And the accounts from that meeting are not helpful for the Euro either. 

Here are three vital dovish points from the document

1) Uncertainty: "Given the uncertainty, it is prudent to leave the end of QE conditional on incoming data." This is not news but still serves as a reminder that the ECB is fundamentally dovish, sees the glass half empty. The word "uncertainty" can be easily be replaced with "concern". 

2) Interest rate pledge open-ended: This is something the minutes wanted to emphasize. This is a reminder that the summer and the autumn of 2019 are still far away and the ECB can keep rates lower for longer. Moreover, there is no clarification about what "through the summer of 2019" means, not responding to recent reports about some hawks wanting to raise rates earlier. The odds of a rate hike have risen on those reports, and may now fall.

3) Unanimous: The minutes state that policymakers were in unanimous support of policy proposals. It is hard to believe that Bundesbank President Jens Weidmann was indeed behind the pledge to maintain low rates. Do the minutes refer only to the decision to reduce QE in October and then to end QE by the end of the year? As in the previous case, this phrase is open to interpretation and leaves more questions than answers. Nevertheless, even if not everybody was behind everything, Draghi still has control over the wording of the minutes, sending a dovish message here as well.

The reaction to the minutes is muted, but it still weakens the EUR/USD when it faces the next challenges. 

More: Trade War from the Trenches: Battle moves to Europe, 3 things to watch

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

More from Yohay Elam
Share:

Editor's Picks

EUR/USD treads water above 1.1850 amid thin trading

EUR/USD stays defensive but holds 1.1850 amid quiet markets in the European hours on Monday.  The US Dollar is struggling for direction due to thin liquidity conditions as US markets are closed in observance of Presidents' Day. 

GBP/USD flat lines as traders await key UK and US macro data

GBP/USD kicks off a new week on a subdued note and oscillates in a narrow range near 1.365 in Monday's European trading. The mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold sticks to intraday losses; lacks follow-through

Gold remains depressed through the early European session on Monday, though it has managed to rebound from the daily trough and currently trades around the $5,000 psychological mark. Moreover, a combination of supporting factors warrants some caution for aggressive bearish traders, and before positioning for deeper losses.

Bitcoin, Ethereum and Ripple consolidate within key ranges as selling pressure eases

Bitcoin and Ethereum prices have been trading sideways within key ranges following the massive correction. Meanwhile, XRP recovers slightly, breaking above the key resistance zone. The top three cryptocurrencies hint at a potential short-term recovery, with momentum indicators showing fading bearish signs.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.