Summary:
-
Draghi: “Outlook is getting worse and worse”
-
Initial market moves reverse
-
EURUSD bounces from 2-year low; Dax falls
There’s been a see-saw market reaction to the latest policy announcement from the ECB with the initial moves reversing as President Draghi conducted his press conference. There was some expectation that the bank would cut the overnight deposit rate, but the Governing Council have seemingly decided to bide their time with all interest rates kept unchanged. The decision was accompanied by a short statement that hinted at the resumption of Quantitative Easing and this caused an initial drop in bond yields and the Euro while stocks rallied. In fact the EURUSD fell to its lowest level in 2 years and was on the brink of trading below the $1.11 handle.
Start investing today or test a free demo
Open account Try demo Download mobile app Download mobile appHowever, once President Draghi began his press conference these moves reversed. It’s not so much that the Italian said anything particularly hawkish but he did seem a little cautious and the overall tone suggests the markets may have gotten a bit ahead of themselves in the initial reaction.
EURUSD has bounced by around 70 pips since Draghi began speaking with the market reacting positively after earlier hitting its lowest level in over 2 years at 1.1100. Source: xStation
The EURUSD is forming a potential hammer on D1 after just dipping below the recent lows to trade at the lowest level since May 2017. Source: xStation
Selected comments from Draghi are as follows:
-
Outlook is getting worse and worse
-
Balance of risks is on the downside
-
No discussion about cutting rates today
-
Want to see next round of projections before taking action
In the normal course of events this could be considered as dovish but given the backdrop of expectations going into the event it looks like it may have come up a little short. Markets were pricing in a circa 40% chance of a rate cut today and the fact that this didn’t happen as well as no concrete promises that it will occur next time out have left the markets a little underwhelmed.
The price action in the German Dax has been pretty ugly in response with the current H4 candle that is yet to close suggesting a pretty strong rejection. The region around 12440 could be seen as key support going forward. Source: xStation
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
