This week mainly focused on the European Central Bank, which, in addition to the decision on rates, surprised the market with other important news that brought EUR / USD to the lowest in July.
It was interesting that interest rates have been completely ignored on the eve of the BCE October meeting, while rained all the expectations on the Quantitative Easing and Tapering.
However, here all the salient points.
The ECB did not touch either interest or deposits rates. The reference rate remained at 0,00%, as expected by most analysts. The deposit rate, on the other hand, did not move from -0,40% confirming in both cases all expectations.
As a result of the announcement of the interest rate decision, took place the usual Mario Draghi’s press conference.
ECB’s President did not want to hear about tapering, but he announced the extension of Quantitative Easing until the end of September 2018 at a monthly rate of 30 billion euros. Draghi pointed out that the program is ‘open ended,’ which means that the ECB will not stop buying bonds suddenly. However the decision was taken by majority and consensus but without unanimity.
Mario Draghi talked about Europe: ’Growth continues to be solid, real GDP grew of 0,7% in the second quarter of 2017 on a cyclical basis. Investments in companies have risen, as are those in the construction sector, while exports are benefiting from the improvement of the economic environment. The risks remain balanced.’
In response to the announcement on Mario Draghi’s Quantitative Easing, EUR/USD has dropped dramatically pushing the cross below 1,18. The sudden drop pushed the currency pair to 1,1750, at a level of support, as evidenced by Fibonacci’s rebound overtaking on the upward trend of the last period.
The same dovish tone about tapering that made sink the EUR/USD has allowed the European stock markets to gain large profits after an opening with uncertainty.
The best among European stock exchanges was Madrid at + 2,16%, Italian Stock Exchange at + 1,37%, followed by Paris at + 0,96% and from Frankfurt at + 0,71%.
In the absence of other macroeconomic data relating to the Eurozone, EUR/USD subsequently focused only on the United States GDP.
The preliminary quarter of the third quarter surprised the market expectations. The figure, which in the previous survey had recorded a + 3,1%, marked + 3,0% different from expectations to 2,5%.
GDP price index, on the other hand, showed a + 2,1%. Analysts predicted a + 1,8%, while in the previous survey the index had marked a + 1%.
Consumption expenditure rose by 2,4%, which did not confirmed the consensus at + 2,2%, nor the previous figure at + 3,3%.
Next week’s economic calendar will be full of ideas. The most important events to be monitored will certainly be the Federal Reserve Monetary Policy Meeting, which will once again express itself on the US economic conditions, interest rates and the reduction of the budget.
Among the market movers of the week there are the Bank of England and the US non-farm payrolls, which will provide new directions to the euro dollar exchange rate.