ECB Policy Statement Leads to Weekly Losses for Euro

One of the most important events this week was the monetary policy decision from the European Central Bank. While the ECB did not change its policy, the accompanying statement was dovish enough to send the euro crashing down against most other major currencies.

ECB President Mario Draghi was rather dovish in his introductory statement to the press-conference, saying:

Looking ahead, we remain committed to preserving the very substantial degree of monetary accommodation which is necessary to secure a sustained convergence of inflation towards levels below, but close to, 2% over the medium term. To that end, we will continue to act, if warranted, by using all the instruments available within our mandate.

Answering for the question about eventual tapering of bond purchases, Draghi said that the matter was not discussed during the meeting, but an abrupt end to the quantitative easing program is unlikely. For now, policy makers wait for December economic projections and will use them as a base for their policy decision.

While the euro was one of the weakest currencies after the ECB meeting, the Canadian dollar was even weaker. The loonie was soft basically for the same reason — the policy meeting of its central bank (the Bank of Canada).

EUR/USD dropped from 1.0967 to 1.0884 over the week. EUR/CHF slid from 1.0861 to 1.0810. EUR/CAD opened at 1.4397, fell to the low of 1.4266 during the week (the lowest since June 24), but bounced to close at 1.4501.

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