Talking Points:
- ECB Rate on main refinancing operations unchanged at 0.00%, as expected
- Deposit rate kept unchanged at -0.40%, as expected
- The Euro was little changed versus other major currencies on the news
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The Euro was little changed versus other major currencies (at the time this report was written) after today’s ECB rate decision, in which the central bank decided to keep monetary policy at status quo. The benchmark interest rate on main refinancing operation was left unchanged at 0.00%, as was expected by economists.
The ECB also kept the Deposit Rate at -0.40%, in line with expectations. The Marginal Lending Facility was kept at 0.25%. The central bank signaled that the monthly purchases under the asset purchase programme (QE) will remain at €80 billion.
The initial press release said that the Eurosystem will start making purchases under its corporate sector purchase programme on June 8. Starting June 22, it will conduct the first operation in its new series of TLTROs.
Coming into today’s meeting, it was widely expected that the bank will keep policy unchanged, as the minutes from the April meeting seemed to confirm that the bank is in implementation mode of the stimulus measures announced in March.
Indeed, the market priced in a 0% chance of a rate cut in EONIA forward rates as well as overnight index swaps, which now puts the spotlight on the Draghi press conference later.
The new staff economic projections will be revealed in the press conference, which will also be in focus. As was mentioned by DailyFX currency strategist Ilya Spivak, traders will probably want to be reassured that further easing options are ready to be deployed if necessary.
The DailyFX Speculative Sentiment Index (SSI) is showing that about 44.7% of traders are long the EUR/USD at the time of writing.
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EUR/USD 5-Minute Chart: June 2, 2016
--- Written by Oded Shimoni, DailyFX Research
