020 7898 0500The single currency surprised the market with the way it performed yesterday following the ECB interest rate decision. They kept interest rates on hold as expected, but it is the press conference that the market watches more closely. In what appeared to be a cautious tone, Draghi stated that a ‘substantial degree of accommodation is still required’, and that ‘underlying inflation is yet to show convincing signs of a pick-up’.
This goes against the grain of what some thought based on the rhetoric from Draghi and other voting ECB members in the weeks leading up to the meeting. It was hoped by some that there would be some signposting of QE tapering, but apparently not.
Despite these dovish comments, the euro strengthened. This suggests that the market does not buy into the tone that Draghi was relaying. Either that, or the tone was one the market expected and following the risk off period leading up to the press conference, investors merely resumed their trades.
It is a quiet day ahead but the market is likely to attempt to decipher today’s comments from the ECB and keep an eye out for any further comments from ECB members.
