The TLTRO auction came out a bit above expectations at €73.8 billion euros. Theoretically, more lending means less printing, but so far there is no evidence of the ECB reacting to TLTRO data.
However, this still seems to help EUR/USD tick up with the higher range and retake the round 1.14 level.
The fourth auction of the ECB’s Targeted Long Term Refinancing Operation (TLTRO) was expected to result in banks taking €60 billion, lower than the previous outtake of €97.8 billion in March.
EUR/USD traded around 1.1380 towards the release, still holding above the 1.1375 it worked so hard to break. The peak was 1.1418. It was reached after a second wave of USD selling that followed the dovish Fed decision yesterday.
The European Central Bank announced the TLTRO scheme a year ago. The Bank lends cheap money to commercial banks under the condition that they lend it out to the real economy. This is similar to the British Funding for Lending Scheme.
If the ECB lends more money to the real economy, it could print less money in its bond buying program. So, a higher outcome could be bullish for the euro. Conversely, less lending means more printing and thus a weaker euro.
However, President Mario Draghi has reiterated that his institution is determined to keep the foot on the pedal. The QE program is intended to conclude in September 2016.
More: EUR/USD: Watch For This Coming Shift In Rates Spread – Deutsche Bank
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