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.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD: Stable amid trade calm and German stimulus hopes

EUR/USD is trading around 1.1100, marginally higher. President Trump expressed optimism about reaching a trade deal with China while Germany's Scholz opened the door to stimulus.

EUR/USD News

GBP/USD steady below 1.2150 after Yellowhammer leak, ahead of Corbyn's speech

GBP/USD is trading below 1.2150 amid reports of food shortages in case of a hard Brexit, project Yellowhammer.  A speech by Labour's Corbyn about stopping such a scenario is awaited. Election speculation looms.

GBP/USD News

USD/JPY bounces off 106.25, focus on Fed minutes, Jackson Hole

USD/JPY bounces off the key support at 106.25 and heads back towards the 106.50 level, in response to downbeat Japanese trade data, risk-on action in the Asian equities and higher Treasury yields.

USD/JPY News

Forex Today: Calm amid Trump's optimism for a deal, ahead of Corbyn's Brexit speech

The market mood is calm and currencies are little changed after US President Donald Trump expressed optimism on reaching a deal with China.

Read more

Gold: Under pressure after bearish outside day, eyes sub-$1,500 levels

Gold is flashing red after Friday's bearish outside day candle. The yellow metal created a bearish outside day candlestick pattern on Friday, which occurs when the trading range engulfs preceding trading day's high and low.

Gold News

Majors

Cryptocurrencies

Signatures