FXStreet (Edinburgh) - Senior Analyst at Danske Bank Pernile Nielsen assessed yesterday’s ECB gathering.

Key Quotes

“As expected, the ECB meeting yesterday provided little news and resulted in limited market reaction”.

“However, Mr Draghi actually surprised a lot as he made some very unusual comments on the currency”.

“The dovish comments on the euro ‘only’ triggered a half figure decline in EUR/USD. However, it was indeed very interesting that Mr Draghi commented on the euro exchange rate and it seems to confirm that EUR/USD trading in the 1.40s indeed was one of the triggers when the ECB decided to cut rates and introduce the new TLTRO two months ago”.

“Overall Mr Draghi signalled that he is pleased with the recent decline in the euro’s exchange rate and said that “the fundamentals for a weaker exchange rate are today much better than they were two or three months ago”.

“In addition, he also offered a long list of reasons why the euro has weakened including less capital flowing into the region, a reduction in euro holdings by other central banks, and increased expectations that the Fed will raise interest rates far in advance of the ECB”.

“Finally, Mr Draghi said that “markets have perceived that monetary policy in the euro and US are and are going to stay on a divergent path for a long period of time”.

“We agree with Mr Draghi on that and we still look for a gradual decline in EUR/USD towards 1.26 in the coming 12 months, primarily driven by a divergent monetary policy between the two central banks”.

Related Articles
  1. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  2. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  3. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  4. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  5. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  6. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  7. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  8. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  9. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  10. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!