ECB news and analysis:
- EURUSD was stable Thursday after the European Central Bank left all its benchmark interest rates unchanged, as expected.
- Now the market is focused on comments by ECB President Mario Draghi at his press conference scheduled for 1330 GMT.
ECB leaves rates unchanged
The European Central Bank’s rate-setting Governing Council has left all its key interest rates unchanged: its refinancing rate at zero, its deposit rate at -0.40% and the rate on its marginal lending facility at 0.25%. The decision was as forecast and EURUSD was little changed in response.
EURUSD Price Chart, Five-Minute Timeframe (January 24, 2019)
Chart by IG (You can click on it for a larger image)
In a statement, the ECB said again that it expects rates to remain unchanged at least “through the summer” of 2019 and in any case for as long as necessary. The Governing Council intends to keep reinvesting in full the principal payments from maturing securities purchased under its asset-purchase program for an extended period of time past the date when it starts raising rates.
Draghi up next
Now, the markets’ focus is on a press conference at 1330 GMT by ECB President Mario Draghi. Against the background of a slowing Eurozone economy, the most important question will be whether the ECB still expects to raise Eurozone interest rates in the third quarter of this year or whether an increase will likely be postponed to the fourth quarter or even to 2020.
Indeed, as growth slows, it is even possible that the next move will be further rate cuts.
In a report released earlier Thursday, IHS Markit said Eurozone business growth came close to stalling at a 5½ year low in January, with the companies it surveyed reporting the first drop in demand for more than four years. Its disappointing Purchasing Managers’ Index data indicate that the Eurozone economy is expanding at a quarterly rate of just 0.1%.
That has raised the question of whether the ECB will stick to its guidance that rates will likely be left unchanged through the summer or will indicate a further delay before its next move.
More to read:
Using News and Events to Trade Forex
Interest Rates and the FX Market
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--- Written by Martin Essex, Analyst and Editor
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