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Draghi reiterates low rates pledge, sees some positive signs

After leaving policy unchanged, ECB president Mario Draghi faces the press. He is expected to re-iterate the pledge for low rates and perhaps acknowledge the green shoots in Europe.

Live blog of the event that always shakes the euro.


  • Draghi re-iterates forward guidance for low rates.
  • Sees tentative signs of stabilization and some growth in H2 2013, 2014.
  • Calls for more action from governments.
  • Decisoin on forward guidance was unanimous.
  • Draghi avoids answering question about cutting rates.
  • Different communications policy will be discussed in the fall.
  • EUUR/USD slides below 1.32 and then stabilzies.

Live Blog

  • 12:15 GMT Press conference begins at 12:30, all times are GMT.
  • 12:15 You can watch the event live here.
  • 12:16 EUR/USD trading at 1.3230 towards the publication.
  • 12:16 At the same time that Draghi begins talking, the US will release its weekly jobless claims report.
  • 12:18 EUR/USD made a false break above 1.33 after the FOMC, and returned back to range. We could see false breaks in either direction now.
  • 12:20 Draghi is expected to say the keywords “downside risks” at the beginning of his statement. This is not new.
  • 12:22 Draghi might be asked about Greece’s funding hole, if the decision was unanimous and about the negative deposit rate, an option which Draghi is always open to.
  • 12:25 In August of last year, Draghi annonuced the willingness of the ECB to intervene in bond markets. So, August is not a month of rest for the ECB.
  • 12:27 Support is at 1.32, followed by 1.3160. Resistance is clearly at 1.33, followed by 1.3350.
  • 12:29 Press conference about to begin.
  • 12:30 US jobless claims fall to 326K – good news.
  • 12:30 Credit dynamics remain subdued, EUR/USD falls to 1.3200.
  • 12:31 Further improvement from low levels, tentatively confirm stabilization. EUR/USD also stabilizes.
  • 12:32 Promoting money market conditions, improvement in remainder of 2013 and in 2014.
  • 12:32 Draghi re-iterates forward guidance – EUR/USD loses 1.32.
  • 12:32 We will monitor all incoming information and assess everything.
  • 12:33 Recent confidence indicators show stabilization and tentatively show improvement. However, labor market conditions remains weak.
  • 12:34 Domestic demand should be supported by monetary loosening. EUR/USD above 1.32.
  • 12:34 Imprvoement making its way to real economy.
  • 12:35 EZ economy should stabilize and remain at low pace.
  • 12:35 Recent glboal developments could weigh on economies.
  • 12:35 Lack of structural reforms could weigh as well.
  • 12:36 Inflation could further fall, depending on energy, among others.
  • 12:36 Economies likely to remain subdued. Risks for price development are broadly balanced.
  • 12:37 Loans to household are broadly unchanged. Weak loan dynamics reflect current state of business cycle.
  • 12:38 Sicne mid 2012, the financial sitaution has improved. Essential that the fragmentation declines further.
  • 12:38 Banking union much needed.
  • 1239 EUR/USD now recovering to 1.3222.
  • 12:40 Euro-area countries should not stop pursuing balanced budgets, though growth friendly.
  • 12:41 Structural reforms should be stepped up: removing rigidities in labor markets, encouraging competition, and fighting youth unemployment.
  • 12:42 Questions begin, EUR/USD higher
  • 12:42 Tentatively confirm stabilization. Draghi repeats statement.
  • 12:43 Decisoin on forward guidance was unanimous.
  • 12:44 How long will this horizon be? As long as inflation is subdued and weakness is all around.
  • 12:44 Liquidity will remain abundant, Draghi stresses.
  • 12:45 No relation between liquidity limits and forward guidance for rates.
  • 12:46 In order to change the guidance, situation needs to change.
  • 12:47 Question about credit contraction:
  • 12:48 Draghi avoids answering question about cutting rates.
  • 12:48 Underlying growth remains subdued. We know there are several reaons: weak demand, heightened credit risk, continued deleveraging, fragmentation on the supply side, etc. Improvement expected.
  • 12:49 Deposit fragmentation is over on the credit front, but on lending, there is some fragmentation.
  • 12:50 Credit growth is an indicator of growth, and the real economy will witness a delay in growth.
  • 12:50 EUR/USD continues recovering, and is already back to the pre-conference levels.
  • 12:51 Question: Will you be introducing minutes or qualitative targets. No qualitative guidance.
  • 12:52 Regarding minutes, ECB has presented forecasts. The governing council talked about enhancing communications.
  • 12:53 Draghi takes his time discussing communications. At this early stage, “I can only be relatively general”. A rationale will be given. But, we are not a one country setup.
  • 12:54 Because it is a 17 member council, releasing minutes should be respectful of this special ingredient of the policy.
  • 12:55 More communications will be discussed in the fall.
  • 12:56 The ECB wants more communications but without politicization of the process.
  • 12:57 Question: are we still in recession? Was the decision on rates unanimous? Draghi says only forward guidance was discussed.
  • 12:59 Draghi also avoids answering the recession question.
  • 13:00 Draghi asked again about no discussion about rate cuts:
  • 13:01 “We haven’t reached a zero bound”.
  • 13:02 Draghi repeats forward guidance statement.
  • 13:02 Question about collateral rules:
  • 13:03 Will the forward guidance be revised monthly? No, we will repeat it only if you don’t get it.
  • 13:04 If we repeat it each time, the markets might think it is “not for a extended period of time” but only for one month…
  • 13:05 On ABS, we now have lower haircuts than beforehand.
  • 13:05 Draghi talks about collaterl rules. In the meantime, EUR/USD is at 1.3230.
  • 13:07 EUR/USD ticks lower to 1.3225 – movements are quite limited.
  • 13:08 There are many questions about communications…
  • 13:09 How will we know when forward guidance has been removed? Draghi says it’s far.
  • 13:10 Draghi refers to the issues the Fed has with communicating tapering.
  • 13:12 Draghi repeats the parameters for the forward guidance.
  • 13:12 Question: what do you think about minutes? Answer: I have to be unspecific.
  • 13:15 Liquidity will remain ample as long as it’s needed.
  • 13:16 Interest rate channel is part of the wway to policy reaching the real economy.
  • 13:18 OMT is not the answer to everything.
  • 13:21 The picture is better than a year ago, from all angles.
  • 13:23 Draghi sounds upbeat by saying that “something has happened regarding competitiveness”, and stresses it is not only the OMT.
  • 13:24 Highly premature to comment on communications.
  • 13:35 Press conference ends – Draghi wishes everybody good holidays. EUR/USD ends at 1.3234. Could rise from here.


The ECB abandoned its “we never pre-commit” policy and committed to keeping rates at these levels or lower for an “extended period of time”. This sent the euro lower back in July. Draghi wanted to “inject a downward bias”.

On the other hand, there have been some green shoots of late: better PMIs in many European countries, rising business confidence and even a drop in Spanish unemployment.

Given Draghi’s tendency to move from pessimism to optimism, today is optimism’s turn. But, you never know.

Opinion:  ECB may try to avoid rate cut if possible

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.