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EURUSD Breaks 1.2400 Handle on European Central Bank Rate Decision

EURUSD Breaks 1.2400 Handle on European Central Bank Rate Decision

2014-12-04 14:07:00
Tyler Amend,
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Talking Points:

- European Central Bank leaves rates unchanged.

- European Central Bank policy will reassess QE effects in the beginning of 2015.

- EURUSD climbs to 1.2415.

The European Central Bank decided to leave its main refinancing rate unchanged at a record low of 0.05%. ECB President Draghi adopted a dovish tone during the press conference following the ECB rate decision release. ECB policy makers have decided to reassess effects of the current stimulus package in the beginning of next year, however policy makers are unanimous in additional QE if necessary. The ECB has trimmed it’s inflation forecasts to 0.5% versus 0.6% for 2014. 2016 inflation expectations have been lowered to 1.3%, which is still troublingly far from the ECB inflation target of 2.0%. It’s important to note that the current inflation forecasts do not take current Oil prices into account, however President Draghi believes cheaper energy prices will increase disposable income for Euro area consumers. Globally low energy prices have the ability to export deflation to the already sliding Eurozone and could potentially pressure the ECB into further action after the reassessment in 2015. President Draghi has previously vowed to raise the sliding inflation rate as fast as possible, however several ECB policy makers have urged patience and cautioned that acting without a clear understanding of the current stimulus package could be uneccessary. ECB President Draghi stated that it would be difficult to estimate the TLTRO takeup and any decision on fresh stimilus will likely be made next year.

Summary of this morning’s European Central Bank Rate changes:

-EUR ECB Main Refinancing Rate (DEC4): 0.050% versus 0.050% expected, from 0.050%.

-EUR ECB Deposit Facility Rate (DEC4): -0.200% versus -0.200% expected, from -0.200%.

-EUR ECB Marginal Lending Facility (DEC4): 0.300% versus 0.300% expected, from 0.300%.

See the DailyFX economic calendar for this week's important events.

EURUSD 1-minute Chart: December 4th, 2014 Intraday

EURUSD Breaks 1.2400 Handle on European Central Bank Rate Decision

Charts Created using Marketscopeprepared by Tyler Amend

EURUSD initially chopped sideways just after the European Central Bank rate decision as Traders waited for comments regarding the rate decision and the possibility of fresh QE from ECB President Draghi at 13:30 GMT. EURUSD charged through the 1.2400 handle and climbed to a high of 1.2415 on comments from President Draghi. This comes as a relief to the embattled Euro as Dollar strength has recently been in the driver’s seat. The pair is currently trading around 1.2386 at the time of this report.

--- Written by Tyler Amend, DailyFX Research

Follow the DailyFX Team on Twitter @DailyFXTeam

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