Many Forex traders and analysts were expecting a dramatic easing announcement from the ECB today. Instead, the announcement avoided an exotic measures and, rather than weakening the euro, sent the 19-nation currency surging against its counterparts.
For weeks, Mario Draghi has been hinting that exotic, desperate measures would be on the table for the eurozone. He has been talking about the importance of “doing what it takes” to stimulate the economy and encourage inflation. As a result, speculation has been running wild, including exotic possibilities like a two-tier rate.
When today’s ECB announcement came, however, it was disappointingly ordinary. Policymakers announced an extension of its asset buying program to include regional and local governments, and cut the rate by 10 basis points to -0.30 per cent.
Many Forex traders and others were disappointed with the announcement since they had been expecting something extreme. As a result, the euro is surging against its major counterparts, and European stocks are tumbling, with the DAX especially hard-hit.
A stronger euro will likely slow efforts at economic stimulus, although some of the recent strength might be limited after this month’s Fed announcement, assuming that US rates really do begin to rise.
At 15:46 GMT EUR/USD is up to 1.0849 from the open at 1.0615. EUR/GBP is up to 0.7209 from the open at 0.7103. EUR/JPY is up to 133.5110 from the open at 130.8080.
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