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Draghi Maintains Balanced Stance – EUR/USD Jumps

After the  ECB left the interest rate unchanged as expected, ECB president Mario Draghi repeated most of the message from the previous event: the situation is not so good but prospects for the rest of the year are better. Growth forecasts have been lowered and the decision was not unanimous. However, Draghi omitted the mention of the interest rate. EUR/USD reacts with a leap towards 1.31.

Draghi holds the key to the next big moves of EUR/USD. Live blog of the event.


  • Inflation balanced.
  • Loose monetary policy helps, but governments need to do more.
  • Growth forecasts lower: -0.1% to -0.9%.
  • No mention of exchange rate.
  • Decision on rates not unanimous
  • EUR/USD ends the press conference around 60 pips higher.
  • Analysis:  No rate cut expected soon, despite lack of unanimity

Live Blog

  • 13:15 GMT: Press conference begins at 13:30 GMT. All times are GMT.
  • 13:15 EUR/USD is within the earlier range of 1.30 to 1.3050 towards the event.
  • 13:18 You can watch the press conference here.
  • 13:19 One of the first questions that Draghi will be asked is: was the decision unanimous? If the answer is “No”, the euro could fall.
  • 13:20 The US will release weekly jobless claims, monthly trade balance and a revised version of non-farm productivity at 13:30, as the presser begins.
  • 13:22 We may see some choppy action at the beginning of the event, no matter what Draghi says.
  • 13:23 Matthew Lifson says that  EUR could rise violently if Draghi provides a pro-euro speech
  • 13:25 What is priced in? Expectations have moved in both directions.
  • 13:27 David Song said that the  next selloff of the euro could come from Mario Draghi
  • 13:28 EUR/USD stabilizing around 1.3022.
  • 13:30 Press conference begins
  • 13:31 EUR/USD falls below 1.30 as Draghi says that inflation is “firmly anchored”.
  • 13:32 Sings of stabilization at low levels.
  • 13:32 Essential for governments to continue implementing structural reforms.
  • 13:33 224 billion of LTROs already repayed.
  • 13:33 LTRO repayment implies that most of receding market fragmentation.
  • 13:34 Monetary stance remains accomodative.
  • 13:34 GDP fell in Q4, due to various reasons. For 2013, economic activity now seen stabilizing in the first part of the year, and should strengthen later in the year.
  • 13:35 EUR/USD rising above 1.3050.
  • 13:36 Growth forecasts revised lower to -0.1% to -0.9%.
  • 13:37 Euro now receding.
  • 13:38 Inflation is now lower, due to lower energy and food components.
  • 13:39 Inflation expectations well anchored. Headline CPI might remain high, but underlying inflation is controlled.
  • 13:39 Inflation forecasts: 1.2% and 2% and 0.6% to 2% in 2014.
  • 13:39 Downside risks due to weak economy, upside risks due to energy, taxes.
  • 13:40 MFI loans to households moderated slightly.
  • 13:40 Tight credit conditions for small and medium sized enterprises.
  • 13:41 Draghi doesn’t mention the exchange rate for now.
  • 13:42 Important to address youth unemployment.
  • 13:43 EUR/USD rises to 1.3065.
  • 13:44 Questions begin
  • 13:45 Mario Draghi respects Italian democracy. He says that markets were less impressed from the Italian elections.
  • 13:46 Contagion has been muted
  • 13:47 We are not planning anything special. OMT is what it is.
  • 13:48 Question: Was the decision unanimous? Is the ECB ready to cut?
  • 13:49 Answers: Yes, we have discussed a rate cut and there was a “prevailing consensus. EUR/USD falls.
  • 13:50 EUR/USD at 1.3060 from 1.3090 at the peak.
  • 13:50 Mostly positive signs on the financial markets
  • 13:51 Target2 balances have improved.
  • 13:52 40% was repaid. The balance sheet of the ECB has shrunk to a minimum.
  • 13:53 Weak demand, weak employment, but a beginning of a gradual recovery. More global demand.
  • 13:54 Full allotment mode as long as needed.  ECB policy stance will remain accommodative as long as needed
  • 13:55 Countries that front loaded austerity will rebound.
  • 13:56 Inflation expectations are firmly anchored, with the medium term objectives of price stability.
  • 13:57 Draghi suggests to check with the ECB.
  • 13:58 Troika is working well.
  • 13:59 We are only in liason with the IMF and EU Commission within the troika.
  • 14:00 EUR/USD’s high was 1.3091 and is now at 1.3073.
  • 14:01 Asset price bubble due to cheap money?
  • 14:01 Not taken any decisions under pressure.
  • 14:02 We have seen lower prices in specific areas and higher in others.
  • 14:02 Stock prices rose all over. In the US, it is connected with the increased prospects for a recovery.
  • 14:03 US data: jobless claims dropped from 347K to 340K, better than a rise to 354K that was expected.
  • 14:03 The ECB was not informed on the nationalization of the Dutch bank.
  • 14:04 US trade balance disappointed with a rise from 38.1 to 44.4, worse than 42.8 that was predicted.
  • 14:05 Questions about the single supervisor, EUR/USD challenges the highs.
  • 14:06 The European political captial invested in the euro is often underestimated.
  • 14:07 Dispersion is somewhat improving.
  • 14:08 A question about Ireland: is the OMT relevant for Ireland? Answer: No.
  • 14:09 Question: Bank run in Cyprus? Answer: there is progress.
  • 14:10 When answering about Cyprus, Draghi says that “our union is not a transfer union”
  • 14:12 Cyprus has to take the chance and address money laundering issues.
  • 14:14 The ECB is not in the business of cleaning banks’ balance sheets.
  • 14:15 EUR/USD peaks under 1.31.
  • 14:15 Draghi explaining banks and government bonds.
  • 14:16 Sytem still fragmented. We are looking for signs of more cross border activitiy.
  • 14:17 Analysis:  ECB: No rate cut expected soon, despite lack of unanimity
  • 14:20 We will not comment on the exchange rate, in line with the G-20 statements.
  • 14:21 Exchange rate not a policy target. EUR/USD stabilizes a bit lower, at 1.3077.
  • 14:22 A sustained rise in the exchange rate has a chance of raising the risk and changing our assessment.
  • 14:25 The OMT is there.
  • 14:26 Unemployment is a tragedy and youth unemployment is worse.
  • 14:27 All the weight of the labor market flexibility is on the youth in some countries.
  • 14:28 Draghi reiterates that the ECB’s policy remain accomodative as long as needed.
  • 14:29 Another question about Italy: Are you afraid that Italy might leave the way of austerity? What about an Italeave?
  • 14:30 Italy should continue reforms, especially structural, refuses to answer the question about the potential Italian euro-exit.
  • 14:31 “We never comment about exchange rates”. Really?
  • 14:32 “Uncharted waters” in negative interest rates.
  • 14:32 Press conference ends. EUR/USD at 1.3080.


Recent data has been quite depressing: the euro-zone economies squeezed by 0.6%, including a squeeze of the same scale from Germany. While German business indicators are bullish, the underlying economy is not all Hunky Dory. For example, factory orders plunged.

Inflation, which is officially the ECB’s single mandate, has fallen below the 2% benchmark for the first time since the peak of the crisis. This could push to hints about future rate cuts. Unemployment is on the rise. However, for a rate cut, we would probably need to see more unwinding of LTROs.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.