The euro has plummeted against the dollar in a dramatic response to ECB Draghi’s statements yesterday.
Floating a little higher today, but still feeling the effects of yesterday’s ECB announcements, the euro is now skimming in a tight range of 1.23761 - 1.24008, having plunged from 1.25199 yesterday, the lowest since 2009.
Though the ECB did relatively little, the market response to speculation was dramatic. Draghi squashed reports of any disagreement between ECB members, whilst saying that unconventional means of economic stimulation and reforms are being discussed at present. The only solid statement made was regarding the Eurozone balance sheet; “Together with a series of targeted longer-term refinancing operations to be conducted until June 2016, these asset purchases will have a sizeable impact on our balance sheet, which is expected to move toward the dimensions it had at the beginning of 2012.” Later in the question period, this was confirmed to be the time when the balance sheet was at its peak at about €3 trillion.
Reviewing previous statements, Draghi reiterated plans regarding interest rates and asset-purchase programmes:
“Based on our regular economic and monetary analyses, and in line with our forward guidance, we decided to keep the key ECB interest rates unchanged. Following up on the decisions of 2 October 2014, we last month started purchasing covered bonds under our new programme. We will also soon start to purchase asset-backed securities. The programmes will last for at least two years.”
Draghi is not attending the Federal Reserve Board meeting today as planned but leading figures chaired by Janet Yellen are meeting in Paris, France at the International Symposium of the Banque de France. The overall theme is stated as ‘Central Banking: The Way Forward?’, whilst Yellan’s speech is entitled, ‘Policy Since the Onset of the Financial Crisis’.
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