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ECB Leaves Monetary Policy Unchanged, EUR/USD Pop Begins to Fade

ECB Leaves Monetary Policy Unchanged, EUR/USD Pop Begins to Fade

Nick Cawley, Senior Strategist

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EUR/USD Price, Chart, and Analysis

  • ECB leaves settings unchanged, in line with market expectations.
  • EUR/USD bounces higher but move lacks conviction.

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The European Central Bank left monetary policy untouched today, as widely expected, and said that while the PEPP program will end at the end of March 2022, it will reinvest the principal payments from maturing securities ‘until at least the end of 2024’. In addition, ‘the Governing Council decided on a monthly net purchase pace of €40 billion in the second quarter and €30 billion in the third quarter under the asset purchase programme (APP). From October 2022 onwards, the Governing Council will maintain net asset purchases under the APP at a monthly pace of €20 billion for as long as necessary to reinforce the accommodative impact of its policy rates. The Governing Council expects net purchases to end shortly before it starts raising the key ECB interest rates’.

ECB Policy Decision

The ECB’s inaction is in contrast to the latest Bank of England policy meeting where the central hiked interest rate by 15bps to 0.25%, and yesterday’s hawkish Fed meeting where the central suggested up to six 0.25% rate hikes may be announced through to the end of 2023. The Fed also said that it was further tapering its QE program by $30 billion a month with the program set to finish at the end of March 2022.

Bank of England Increase UK Interest Rate, GBP/USD Jumps

Federal Reserve: December FOMC Rate Decision

EUR/USD pushed higher on the ECB announcement but is starting to give back some of its gains. Attention now turns to the ECB press conference for updated guidance at 13:30 GMT

EUR/USD 15 Minute Price Chart December 16, 2021

Retail trader data show62.03% of traders are net-long with the ratio of traders long to short at 1.63 to 1. The number of traders net-long is 10.30% lower than yesterday and 3.90% lower from last week, while the number of traders net-short is 4.69% higher than yesterday and 1.28% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall.Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

EUR/USD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -15% 16% 2%
Weekly 4% 2% 3%
What does it mean for price action?
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What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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

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