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After the ECB left all rates unchanged as  expected, the focus moved  to Mario Draghi. In a press conference from Naples, the Italian president of the central bank provided  a timetable for the new measures, mentioned  lower inflation, but mostly passed the ball to the governments’ courts and did  not say anything to rock the boat. On this background, EUR/USD moves higher as no new blows fall upon its head. 1.27 is getting closer.

Here is the  live blog of this big market moving event.

Highlights

  • Covered bonds to be bought in mid October, ABS in Q4, TLTROs until mid 2016
  • Inflation subdued.
  • Hard to assess size of ABS: to buy ABS in nations rated below BBB- with a caveat.
  • Exchange rate is not a policy target.
  • No details on exact balance sheet target
  • No program – no purchases
  • We already did a lot, but ready to do more.
  • Focuses on governments’ role.
  • EUR/USD rises to 1.2690 but slides back down.

Live Blog

  • 12:15 GMT Press conference begins at 12:30, all times are GMT.
  • 12:15 You can watch the presser live here.
  • 12:15 EUR/USD traded steadily towards the publication.
  • 12:16 At the same time, the US releases weekly jobless claims, and they are expected to stand at 299K.
  • 12:17 In a recent interview, Draghi put the emphasis on the governments’ roles in  igniting growth.
  • 12:19  The ECB leaves the headquarters in Frankfurt twice a year.
  • 12:21 The low so far has been 1.2570, and 1.2660 works as resistance.
  • 12:25 There will be no staff forecasts this time, but we will get a general view from Draghi.
  • 12:27 The feed from the event is already live, but Draghi is still not in the house.
  • 12:28 The prices of oil continues falling, and Draghi may mention it as a  cause for low inflation.
  • 12:30 US jobless claims fall to 287K – great news for the US.
  • 12:31 Draghi still awaited. In the meantime, EUR/USD slips, probably on the jobless claims.
  • 12:33 Draghi is certainly taking his time. The event has not begun yet.
  • 12:34 The better than expected jobless claims might marginally lift expectations for tomorrow’s Non-Farm Payrolls. Here is how to trade the NFP with EUR/USD.
  • 12:35 This isn’t typical – the ECB is usually on time, but this time it’s out of their headquarters.
  • 12:36 Draghi in the house, finally.
  • 12:37 Draghi begins 7 minutes late. EUR/USD at 1.2628
  • 12:37 Decided to keep interest rates unchanged, and supply some details on the new programs.
  • 12:38 Programs to begin in October and then in December. Sizable impact on the balance sheet. EUR/USD lower.
  • 12:39 Positive spillovers to other markets. To strengthen the forward guidance on key ECB interest rates.
  • 12:40 EUR/USD is dipping below 1.2620, but is not much lower.
  • 12:41 The determined implementation will underpin the inflation expectations.
  • 12:42 Demand for exports should benefit from the global recovery.
  • 12:43 Recovery to be dampened by high unemployment.
  • 12:43 Insufficient progress in reforms is a key downward risk.
  • 12:44 Stronger decline in energy prices responsible for lower inflation.
  • 12:45 Geopolitical risk is also critical.
  • 12:46 Inflation to increase gradually in 2015 and 2016 – will closely monitor risks to inflation in the medium term. One of the risks is the exchange rate.
  • 12:46 EUR/USD is now reversing the move and climbing up to 1.2646.
  • 12:47 Still seeing adjustments in bank lending.
  • 12:47 Weak credit growth is now in the background of the AQR.
  • 12:48 Data confirms earlier decisions to add stimulus.
  • 12:48 Draghi dos not rock the boat, EUR/USD ticks higher.
  • 12:49 Questions begin
  • 12:50 Hard to give figure for ABS.
  • 12:51 The  total rise of the balance sheet is expected to send the balance sheet towards the 2012 levels.
  • 12:52 More details at 13:30 GMT, in another communique.
  • 12:53 Want to be inclusive but prudent on ABS.
  • 12:54 ECB to but ABS with ABS in nations rated below BBB- with a caveat.
  • 12:54 Exchange rate is not a policy target.
  • 12:55 Draghi said “not married” to the 5y/5y measure.
  • 12:56 A prolonged period of too low inflation hurts economy.
  • 12:57 EUR/USD now making a bigger move upwards – 1.2655.
  • 12:58 We did a lot of things since June.
  • 12:59 Unanimous in its commitment to use  non conventional tools.
  • 13:00 What about the balance sheet? Draghi refuses to answer.
  • 13:02 The ultimate goal is to bring inflation down.
  • 13:03 Government help needed and so are structural reforms.
  • 13:04 The former support line of 1.2660 is being fought over.
  • 13:05 Some of what we’re doing is passed very painfully, slowly to the real economy.
  • 13:07 On the exchange rate:  nothing to see here.
  • 13:07 EUR/USD rises to 1.2670.
  • 13:09 Would like to see some strengthening of the economy.
  • 13:10 Banks are free to do what they like. TLTROs are part of the measures. TLTROs devised to ensure banks lend to the real  economy.
  • 13:11 EUR/USD retreats back to 1.2660.
  • 13:12 No program, no purchases.
  • 13:13 Understands euro skeptics, but euro is irreversible.
  • 13:14 EUR/USD is rising even higher, to 1.2680.
  • 13:16 We already did a lot.
  • 13:17  When Draghi says we already did a lot, markets read “not much more left” – EUR up.
  • 13:18 A “sizable” impact on the balance sheet, reiterates Draghi
  • 13:19 In spite of all the measures, we are ready to more – the markets don’t believe that so much today.
  • 13:20 Potential universe is one trillion euros.
  • 13:21 France is in the spotlight, and Draghi tiptoes around this topic but says “now, it is implementation time”.
  • 13:22 But he says that he awaits the budget.
  • 13:22 Observed a drop in energy prices, but also in other components. This is something we are looking at that (referring to core inflation).
  • 13:23 So far, drop in food and energy were the best explanations, and later the exchange rate. More recently, we see that the forecast error cannot be attributed only to volatile items and the exchange rate, but now it also contains unemployment. The longer we stay in this environment, the longer it integrates.
  • 13:24 No more cuts to interest rates.
  • 13:25 Draghi reflects on the past and on the terrible  situation and what the ECB has already done. This comes in contrast to all the guilt he took beforehand.
  • 13:29 EUR/USD stabilizes under 1.2680. The high has been 1.2690 so far.
  • 13:30 Draghi answers a question in Italian towards the  end of the presser.
  • 13:30 Confidence in the future is a pre-condition for growth. Less taxes, more reforms, certainty are necessary, not only for Italy.
  • 13:32 We need to make steps forward in the real economy, not only in financial markets.
  • 13:33 Our policy helped reduce the supply on credit.
  • 13:33 EUR/USD nos slides back below 1.2660.
  • 13:33 Press conference ends.  
  • The next big event is the US Non-Farm Payrolls.  Here is how to trade the NFP with EUR/USD

Background

The ECB surprised with even more rate cuts in September and announced  a “sizable” ABS program. Since then, EUR/USD fell  around 500 pips, but despite a weaker euro, inflation is at rock bottom levels: CPI at 0.3% and Core CPI at 0.7%.

Draghi said the ECB is ready to do more, but he also calls on governments to do more.

ECB Preview: Draghi to hit the euro when it’s down? 5 topics to watch out for