ECB Quick Analysis: Doves 3: Hawks 1 - Draghi drags the EUR/USD down

Yohay Elam FXStreet

The European Central Bank delivered quite a few changes and triggered quite a bit of volatility, yet not in favor of the common currency.

The monetary hawks score one goal: the ECB announced the tapering of bond buying in its June decision, defying expectations that the decision will wait until July.

However, the doves scored three critical goals:

1) The tapering is not as quick as some had expected: There were some prospects that the ECB would taper to €15 billion in October, €10 billion in November, and €5 billion in December. The result is not a gradual tapering but a reduction to €15 billion for each of these months in the last quarter of 2018.

2) The end of tapering is conditional: Starting in 2019, the ECB will no longer buy bonds, but only if things develop as expected. The Frankfurt-based institution has left the door open to change its mind if inflation does not develop as expected. This is a cautious approach.

3) No hikes at least until the Summer of 2019: The pledge to hold rates unchanged at least until one year from now is the most dovish move. The conditionality goes only in one way: to keep rates lower for longer. There was no open the door to hike earlier if inflation accelerates.

All in all, ECB President Mario Draghi, which is a known dove, won over his rivals in an impressive way. The resulting downfall of the euro will help him achieve higher inflation that the Bank is committed to.

Follow the live coverage of the Draghi show

Here is how the pair reacted. It looks like a convincing 3:1 victory for Dovish Draghi.

Author

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.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

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.