EURUSD under the Influence of ECB

Last week’s highlight was the European Central Bank’s (ECB) decision to leave the monetary policy rate unchanged at 0.05% while the rate on the margin lending facility is maintained at 0.30% and the deposit facility rate still in the negative side at -0.30%. The decision came with no surprise, as the market expected the rates to remain the same.

In the release, Mario Draghi, the president of the ECB, also spoke about the efficiency of the current monetary policy, stating that the asset purchasing program is advancing smoothly, making clear the fact that the monetary policy measures introduced in the mid-2014’s are functioning properly.

Regarding the interest rates, his expectancy is that they will remain unchanged in the near future. Also, he highlighted the increase in downside risks, noting that the financial markets and commodity volatility added to the geopolitical crisis make a fine threat to the euro-area growth. As per his opinion, inflation will remain low for the time being, but it will pick up in later in 2016, the dynamics of inflation being weaker than expected.

Draghi draws attention that in the case of a spike in downside risks (generated by the global market turmoil), the ECB will review and maybe reconsider its policy stance in the next meetings, whit a high probability that more quantitative easing might occur in March’s meeting.

Taking a look over the trend, we can see that the EUR/USD came back from below 1.0800, recovering the lost ground after Draghi’s speech.

The major cross posted minor losses on Friday, remaining near the lows, but managing to overcome the 1.0800 handle, with a loss of 0.52% for the whole day. The daily low hit 1.0792, but the trend quickly retraced above the 1.0800 thresholds. Late in the day, the trend remained steady flickering in the 20-hour MA (Moving Average) area, standing at 1.0835 and 1.0800. Taking the whole week, we can see that the trend went down, the decline sending the major 100 pips lower than seven days earlier.

Friday’s risk appetite weight heavily on the US dollar, but it didn’t manage to boost the EUR/USD. For which regards the Euro, we continue to see negative correlations between the currency and the stock evolution. Wall Street’s main indexes went up last week while the European markets closed the week with gains in a range between to 2% and 3%. Thursday’s and Friday’s rally seen in equities overcame the weekly losses, erasing any negative impact and posting gains.