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  • EUR/USD maintained its bid tone following the ECB monetary policy decision.
  • The ECB left interest rates unchanged and increased the size of PEPP by €500 billion.
  • Investors look forward to the latest economic projections and post-meeting presser.

The EUR/USD pair held on to its modest daily gains and refreshed daily tops, around the 1.2110 region following the latest ECB monetary policy decision.

As was widely expected, the European Central Bank decided to leave left its benchmark interest rates (deposit facility rate, main refinancing, marginal lending facility) unchanged at December meeting.  The ECB increase the size of its Pandemic Emergency Purchase Program (PEPP) by €500 billion until March 2022 to support the COVID-19 stricken EU economy.

In the accompanying policy statement, the central bank reiterated that uncertainty remains high with regards to the dynamics of the pandemic and timing of vaccine rollouts. Policy measures taken today will contribute to preserving favourable financing conditions over the pandemic period, the statement added further.

Given that additional monetary stimulus was already promised and priced in the market, the announcement did little to provide any meaningful impetus to the shared currency. That said, the prevalent US dollar selling bias remained supportive of the bid tone surrounding the EUR/USD pair.

Market participants now look forward to the ECB’s latest economic projections. This will be followed by the post-meeting press conference, where comments by the ECB President Christine Lagarde might infuse a fresh bout of volatility and assist traders to grab some short-term opportunities.

Technical levels to watch