Yet another dry, somewhat lacklustre and wholly uninspiring monetary policy press conference from the European Central Bank’s President Draghi. Eurgh!
During yet another round of disappointment to the long-term normalisation of European monetary policy, Draghi announced that rate setters acknowledged downside risks are growing, with the outlook for short run economic growth drifting lower. Draghi maintained optimism over the medium run that allowed him to reiterate the dreary and uncompromising forecast to keep incumbent monetary policy conditions intact at least through the summer of 2019.
Investors were not impressed by Draghi’s statement, selling the Euro in droves and forcing EURUSD well below its 1.14 upper bound, falling to an intraday low of 1.1306. The market still does not price in even a 10-basis point hike in 2019, showing its disdain for Draghi’s central bank. Immediately, the central bank does not anticipate a recession as its base case scenario. However, during the press conference that followed this afternoon’s event, super Mario did suggest that liquidity (read interest rates) will remain plentiful (read low) throughout the next decade.
The Pound traded within a tight rate today, flirting with the 1.15 level against a more turbulent Euro. Market remain in the lurch awaiting further news on Brexit ahead of Tuesday’s vote
Discussion and Analysis by Charles Porter