The European Central Bank left all interest rates unchanged in its October meeting, as widely expected. The main lending rate remained at 0.50% and the deposit rate was left at 0%. The drop in excess liquidity didn’t trigger action on the rates.
The focus now shifts to the press conference by Mario Draghi. Given the drop in inflation, he might express some dovishness for a second month in a row, breaking from his tradition of changing moods between meetings.
Update: see a live blog of the event.
EUR/USD was trading lower during the day despite hope for a positive outcome in the Italian confidence vote, with 1.3506 being the low and 1.3510 the level before the publication. The pair is now far from the near-1.36 levels it saw after the US government shutdown.
Support appears at 1.35, followed by 1.3415. Resistance is around 1.3570. Stay tuned for a live blog of Draghi’s press conference, which is expected to trigger bigger moves in EUR/USD.
Draghi could also address the drop in excess liquidity and provide hints for future monetary policy.
Italy’s political crisis was triggered by Berlusconi, who withdrew his ministers from the grand coalition government.
But, in an interesting twists, a rebellion started in his party, and after PM Enrico Letta called for a confidence vote, around 20 members said they would support the government. The vote is expected later in the day.
For more, see the EUR to USD forecast.
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