The first effective week of September focused on the euro/dollar and the European Central Bank’s interest rate decision.
The ECB has left unchanged the interest rates and the reference rate remained at 0,00%, confirming all market expectations.
The marginal refinancing rate was left at 0,25%, while the one on deposits remained negative at -0,40%.
Regarding the unconventional monetary policy measures, the press release states that: “The Governing Council confirms that intends to conduct net purchases of assets at the current monthly rate of 60 billion euros until the end of December 2017 or even if necessary, and in any case until it finds a lasting change in price evolution, consistent with the inflation target.”
Following the publication of the press release, it was the time of Mario Draghi’s press conference.
The President of the European Central Bank said he did not see the negative effects of Quantitative Easing, but only positive effects, which is why tapering is still a remote option (maybe this autumn).
Inflation forecasts have been downward from 1,3% to 1,2% in 2018 and 1,6% to 1,5% in 2019; confirmed that of 2017 to + 1,5%.
European economy grew more than expected in the first half of the year and to date it continues to be solid. This is why, the economic growth of 2017 was revised upward from 1,9% to 2,2%.
During the press conference, EUR / USD flew above 1,20. After a fairly flat start, the cross embarked on a true climb that from $1,19 brought it first to the high range of $1,19 and then over $1,20.
The euro dollar exchange jump began already before the ECB meeting: it was not determined by particular drivers as macro or other data, but found the foundation for a renewed sales pressure on the US dollar.
Additionally, while waiting for the European Central Bank meeting, many traders have started to reposition on the cross, a factor that could have contributed, albeit limited, to the rise in pre-Draghi.
To confirm what Draghi said, came in the data on second-quarter European GDP. The second-quarter GDP rose +0,6%, confirming both the expectations and the initial data.
On an annual basis, and with reference to the second quarter of 2016, Eurozone’s GDP rose of 2,3%, which did not surprising the market and its expectations to 2,2%.
The euro dollar came to the level of 1,2092, inviolate since the first days of 2015.
Among the various reasons behind this rally, in addition to the factors mentioned above of the ECB and the fact that Mario Draghi does not seem worried about the euro, there is also the collapse of US yields.
The perspectives for the US dollar worsen, with Harvey and Irma hurricanes, a scenario that slows down the prospects for a Federal Reserve’s interest rate rise in December.
On the Economic Calendar, the Non-Farm Payroll rose unexpectedly and they seems to be going up further, with the labor market facing the closure of industries and corporations in Texas severely hit by Harvey’s hurricane.