A surging euro was hit by a reality check today as ECB President Mario Draghi took a surprisingly cautious tone in his post-meeting statement, choosing to overlook an improved growth picture and instead focus on lower inflation. The ECB will continue to pump EUR 60bln into asset purchases each month until December at least and will only make adjustments when the “path of inflation is consistent with its inflation aim”. For the moment though, Europe continues to require a “very significant amount of policy accommodation”.
The euro has enjoyed an early-summer bloom as political headwinds have dissipated, even becoming the darling of fund managers and real money investors who elsewhere see an increasingly risky global landscape. Having flirted with 1.0902, a resistance level marked by the November 2016 high, EURUSD fell firmly to 1.1200 as improving sentiment got overwhelmed by ECB caution.
Euro slips as ECB damps down inflation, tampering expectations
Richard de Meo quoted in Reuters