While nobody was expecting much from the ECB's policy statement this morning, with all eyes on Draghi's press conference in 45 minutes, judging by the disappointed market reaction to what were largely canned remarks by the ECB which sent the EURUSD in kneejerk reaction lower, positioning is indeed stretched and unless Draghi comes out with hawkish bazookas blazing, the EURUSD may slide bigly.
Back to the ECB's decision, it announced that it kept both its rates and QE unchanged, with QE expected to run at €60BN per month until end of December or beyond if needed, “and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.” The ECB said it was also ready to extend QE “in terms of size and/or duration” if economic outlook worsens or financial conditions “become inconsistent with further progress towards a sustained adjustment in the path of inflation.”
On rates, the central bank expects these to stay at present levels “well past” QE horizon
- Main refinancing rate unchanged at 0.00%
- Deposit facility rate unchanged at -0.40%
- Marginal lending rate unchanged at 0.25%
Full statement below:
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.
The market's kneejerk reaction: dovish statement, with EURUSD sliding to session lows and 10Y bund yields tumbling.
So ahead of Draghi's press conference, here are two cheat sheats on what to expect from his remarks:
And from Citi: