Euro exchange rates were left trending bullishly after the European Central Bank (ECB) made no changes to monetary policy at its latest meeting. Markets had not expected any adjustments to the various interest rates, but some other tweaks had been expected.
Chief amongst these expectations was that the Governing Council – the ECB’s body of policymakers responsible for setting monetary policy – would adapt the parameters of its quantitative easing programme. Quantitative easing (abbreviated to QE) is a method of injecting more cash into an economy by creating new electronic money and using it to buy assets from large investors (such as banks). Investors that have been given cash in exchange for their assets are free to make new investments, which they do with governments or corporations, improving cash flows and boosting spending.
The ECB is currently facing a dilemma with its QE programme; namely that it is enormous. The ECB buys €80 billion worth of assets each month and the supply is beginning to run out. There are strict criteria, set by the ECB itself, regarding what type of assets it can buy, narrowing the field and creating a risk that the central bank will ‘bleed the well dry’. That’s why investors were expecting the Governing Council to tweak those criteria in order to avoid running out of assets to buy.
Other than that, markets were left without much to go on. The ECB did lower its forecasts marginally and noted that uncertainty from the UK’s Brexit decision would weigh on the Eurozone. However, Mario Draghi is well known for making dovish comments that severely weaken the Euro, so the fact he didn’t this time around cheered investors. What Draghi did note – that interest rates would remain low for some time – was already widely suspected, so there was no adverse market reaction to the ‘news’.
The Euro Pound (EUR GBP) exchange rate is trending around 0.8468.
The Euro US Dollar (EUR USD) exchange rate is trending around 1.1271.
The Euro Swiss Franc (EUR CHF) exchange rate is trending around 1.0928.
The Euro Canadian Dollar (EUR CAD) exchange rate is trending around 1.4528.
The Euro Australian Dollar (EUR AUD) exchange rate is trending around 1.4670.
The Euro New Zealand Dollar (EUR NZD) exchange rate is trending around 1.5165.
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