ECB Quick Analysis: Not rocking the boat, but it's already sinking, EUR/USD could extend the slide

  • The ECB left all its policies unchanged, including guidance. 
  • Draghi's warning about downside risks weighs on EUR/USD.
  • The ECB pressures EUR/USD, and more may be in store. 

The European Central Bank left its interest rates unchanged, including the deposit rate, which will not be "tiered" anytime soon, according to President Mario Draghi. They also left the forward guidance unchanged, thus signaling no rate hikes this year.

Another "no-change" came from the assessment of risks. It remains tilted to the downside according to the Frankfurt-based institution. Concerns about geopolitics, emerging markets, and protectionism all weigh. On the other hand, the labor market remains promising. 

And this statement about downside risks weighed on the euro, even though it was only a repetition of the previous statement. 

Why? First, algorithms respond to these headlines with sell orders. Also, the lack of improvement and a rebalancing of risks does not help. 

It did not go too far, not only as there was little new in his words, but also due to US data. Inflation is sliding also in the US, with Core CPI disappointing with 2.0% against 2.1% expected. 

However, Draghi later said the R-word: recession. He stated that the risks are low given the ECB's studies. However, the mere mention of the word already triggered more selling, algorithmic or by traders, that do not like the mention of the word.

EUR/USD has more room to the downside

The world's most-popular currency pair could extend its falls. The upcoming TLTROs and taking forecasts into the equation could push the common currency lower. But that comes just in June.

And for the shorter term, the ECB showed its dovishness, not so surprising but it serves a reminder. The FOMC Meeting Minutes are due later on, and they provide details from the dovish tilt that the Fed took. However, the economic situation and the interest rates are entirely different on the other side of the pond. All in all, the risks are tilted tot he downside not only for the euro-zone economies but also for EUR/USD

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD bounces after upbeat COVID-19 cure news

EUR/USD is trading above 1.13, rebounding from the lows. Gilead reported that its drug Remdesevir substantially reduces mortality among COVID-19 patients. The news boosted stocks and weighed on the dollar. US coronavirus statistics are due out.


GBP/USD recaptures 1.26 as the market mood improves

GBP/USD is trading above 1.26 as the market mood improves and the safe-haven dollar retreats. Investors are shrugging off Brexit concerns and focusing on hopes to cure coronavirus. US COVID-19 statistics are due out.


XAU/USD consolidates daily gains above $1,800

After advancing to its highest level since September of 2011 at $1,818 on Wednesday, the XAU/USD pair staged a correction and briefly dropped below $1,800 on Thursday.

Gold News

Cryptocurrencies: War for dominance hit the bedrock of the market

Bitcoin tried to regain market share and activated sales in the Altcoin segment. BTC/USD, ETH/USD and XRP/USD are looking for supports and a rebound to push them to new elative highs. The current compression on the XRP/USD chart could trigger an exploding movement.

Read more

WTI once again breaks $40 per barrel after trading lower in early EU trade

There has been quite the bounce in WTI since the EU session after some strong selling pressure during Thursday and overnight. Once again on Friday's session, the price has taken the USD 40 per barrel handle. 

Oil News

Forex Majors