Draghi Open to “Nuclear Option” – a Negative Deposit

Towards the end of Mario Draghi’s press conference he left the door open to setting a negative deposit rate, a move that would scare money out of the euro zone.

The euro certainly got scared and lost around 100 pips instantly, falling to 1.3080. The move continues.

More: Are negative interest rates really possible? Yes they are 

Draghi said:

ECB has an open mind on negative deposit rate

and:

There are possible consequences to deposit rate cut but we are prepared to act to mitigate these … the ECB is technically ready to cut deposit rates

This is the “nuclear option” mentioned in the ECB preview. While the most extreme scenario of setting negative deposit rate didn’t happen, scenario No. 3, where Draghi hints about a negative rate, certainly happened.

By saying that the ECB is ready to mitigate the negative effects of such a negative rate, the hint and the threats are much thicker than just not ruling out this option.

For more about the euro, see the EUR/USD forecast. Here is a live chart of EUR/USD:

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