The euro saw its optimism dashed this afternoon as Mario Draghi made sure the ECB’s latest taper still came across as resolutely dovish.
As expected the ECB confirmed it would be cutting its monthly bond buying programme from €60 billion to €30 billion from next January until at least September 2018. While none of this was a surprise, the euro was clearly disappointed, shedding its early growth soon after the announcement. Yet the currency’s misery had only just begun.
It was clear from the start of Draghi’s press conference that he was intent on maintaining his typically dovish tone. He claimed the ECB had ‘recalibrated’, not tapered, its monetary policy; argued that the eurozone’s inflation outlook is way behind’ the US when asked about the Fed’s more aggressive tightening; and, most damningly for the euro, stated that the quantitative easing programme is still ‘open-ended’.
Those kinds of comments kick any ECB rate hike well into the future – maybe even until after Draghi’s tenure at the top comes to an end in October 2019 – news that obviously wasn’t welcomed by the euro. The currency plunged 0.7% against the dollar, taking it to a 3 week nadir, while it shed 0.2% against the pound.
The eurozone indices, on the other hand, were pretty damn jubilant – and not just because of the ECB. There seemed like there was about to be another twist to the Catalan crisis this Thursday, with the region’s leader Carles Puigdemont scheduling a statement at midday, only for it to be delayed, then cancelled. Reports suggest Puigdemont was going to announce a snap election, something that would in all likelihood delay any declaration of independence.
Regardless the IBEX greeted this news with glee, rocketing 2.2% higher to a near 4 week peak. The Spanish index wasn’t alone; the CAC surged 1.2%, while the DAX jumped 100 points to climb back towards its all-time highs.
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