We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Mixed
USD/JPY
Bearish
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Mixed
More View more
Real Time News
  • Commodities Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Gold: 0.53% Silver: 0.35% Oil - US Crude: 0.20% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/7C3JtRpJc2
  • Fed Funds Futures are pricing a 7.7% probability for a rate cut at next month's FOMC meeting, down from 57.7% on October 3rd https://t.co/0YSVotzeMk
  • RT @ZabelinDimitri: - #USDBRL reaching edging closer to retesting 14-month high - Recent price action suggesting upside momentum is waning…
  • 🇳🇿 NZD BusinessNZ Manufacturing PMI (OCT), Actual: 52.6 Expected: N/A Previous: 48.8 https://www.dailyfx.com/economic-calendar#2019-11-14
  • 🇳🇿 NZD BusinessNZ Manufacturing PMI (OCT), Actual: 52.6 Expected: N/A Previous: 48.4 https://www.dailyfx.com/economic-calendar#2019-11-14
  • Crude #oil prices remain trapped in the sideways consolidation that has defined price action since October 31. Get your market update from @CVecchioFX on crude oil here: https://t.co/v5OKIqX6Z1 #OOTT https://t.co/hzbfxcH6eN
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.57%, while traders in France 40 are at opposite extremes with 84.14%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/czS6J7TV5z
  • Just a reminder, the White House's deadline on the auto tariff decision is due today after the extension. Stay on Twitter watch. Trump seems to like make big calls shortly after the close...
  • Heads Up:🇳🇿 NZD BusinessNZ Manufacturing PMI (OCT) due at 21:30 GMT (15min), Actual: N/A Expected: N/A Previous: 48.4 https://www.dailyfx.com/economic-calendar#2019-11-14
  • RT @ABehsudi: Commerce is expected to extend a limited, temporary waiver for blacklisted firm Huawei, notwithstanding any last-minute direc…
EURUSD Drops as ECB Paves Way for Rate Cut and QE Restart

EURUSD Drops as ECB Paves Way for Rate Cut and QE Restart

2019-07-25 12:00:00
Daniela Sabin Hathorn, Junior Analyst
Share:

Talking Points:

  • ECB changes forward guidance towards easing, rate cut warranted in September
  • New round of bond purchases will be announced
  • Tiered rates may be introduced to mitigate negative rate impact on banks

EURUSD saw some volatility prior to the announcement as the pair spiked to 1.1149 before dropping back to around 1.1120 as the ECB kept rates unchanged but signalled further monetary stimulus to come in September.

A key takeaway from this meeting are the changein the Central Bank’s forward guidance, shifting from keeping rates at current levels to keeping them at current or lower levels until mid-2020, signalling that they are prepared to lower rates in the September meeting, possibly taking the deposit rate 10 bps lower to -0.5%. Analyst views and expectations for this meeting were relatively split as some believed that the outcome would only yield information about further monetary stimulus whilst some believed the bank would take immediate action towards growing risks by cutting rates, with some analysts even predicting a 20-bps cut. This saw the EURUSD spike higher after the announcement but quickly correct lower pushing down past 1.1120 as expected.

PRICE GRAPH: EURUSD AFTER ECB RATE DECISION (ONE-MINUTE TIME FRAME)

EURUSD Drops as ECB Paves Way for Rate Cut and QE Restart

Another key point is that the ECB is considering introducing a tiered margining system to mitigate the impact that negative rates have on banks’ profitability, meaning that lower rates are intended for longer. They also signalled further asset purchases to come but given that the ECB has purchased 2 trillion euros of bonds since 2015, it is nearing its self-imposed ceiling of not owning more than a third of a country’s debt, which could see them increase the issuer limits to allow for further stimulus.

A report released earlier this month by the IMF said that the Eurozone would continue to face unprecedented risks stemming from trade wars, Brexit and Italy, and that the ECB should keep monetary policy accommodative as the19-nation currency bloc will face slowing growth in the coming year.

TLTROs: What they are and how the influence the economy

Negative rates and TLTROs

Focus on Draghi’s Meeting minutes for more insight into the ECB’s monetary policy and forward guidance at 1230 GMT which could see further volatility for the EUR.

Recommended Reading

Eurozone Debt Crisis: How to Trade Future Disasters – Martin Essex, MSTA, Analyst and Editor

KEY TRADING RESOURCES:

--- Written by Daniela Sabin Hathorn, Junior Analyst

To contact Daniela, email her at Daniela.Sabin@ig.com

Follow Daniela on Twitter @HathornSabin

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.