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ECB recap: “Through the summer” means through the summer

In perhaps the least surprising development of the year, the European Central Bank left all its interest rates and its asset purchase program unchanged in this morning’s monetary policy meeting. Headlines from ECB President Mario Draghi’s press conference follow:

  • SIGNIFICANT MONETARY POLICY STIMULUS STILL NEEDED, QE STOCK, REINVESTMENTS, GUIDANCE PROVIDE STIMULUS
  • ECONOMY PROCEEDING ALONG SOLID, BROAD-BASED GROWTH PATH
  • UNCERTAINTY RELATED TO TRADE REMAIN PROMINENT
  • RISKS TO GROWTH OUTLOOK REMAIN BROADLY BALANCED
  • GLOBAL UNCERTAINTY, THREAT OF PROTECTIONISM PROMINENT
  • TRADE WAR WOULD CREATE ENTIRELY DIFFERENT CLIMATE
  • MID-TERM OUTLOOK FOR GROWTH, PRICES UNCHANGED FROM JUNE
  • UNDERLYING INFLATION REMAINS MUTED, VERY EARLY TO CALL VICTORY ON INFLATION

Draghi ultimately wound down the press conference 20 minutes before its scheduled ending time, underscoring the lack of new information or imminent action from the ECB.

While many of the comments had a hawkish tone, Draghi was apparently at pains to verify that leaving interest rates unchanged “through the summer” meant until after the summer, noting that market pricing of the next rate hike (57% chance of 10bps hike in September 2019) was about right (see yesterday’s report, “ECB Preview: 2 key things to watch in an otherwise quiet meeting” for more).

Market Reaction

The euro held up relatively well for the majority of ECB President Draghi’s press conference, but eventually succumbed to selling pressure. EUR/USD, which was testing the top of its symmetrical triangle pattern heading into the release, has now dropped 80 pips from its intraday high to trade back around 1.1660 as of writing.


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