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The European Central Bank (ECB) left its policy rate at -0.50% but eased policy via a EUR500 B increase in its PEPP facility, which was also extended to run through to the end of March 2022. This was largely in line with consensus expectations, but markets seem to be a bit disappointed that the ECB didn’t do more, especially on liquidity, with the EUR and rates higher, per TD Securities.

Key quotes

“The ECB left the deposit rate unchanged, but announced a EUR500 B expansion of its PEPP facility, bringing the total to €1.85tn, and extending the programme to run to at least the end of March 2022. The bank also eased the terms of its TLTROs, with extending the low -1.0% rate (though not cutting it) by one year until June 2022, with three additional operations between June and December 2021.”

“EUR/USD caught an initial bid in the immediate aftermath of the decision, but we are not yet inclined to read too much into the move — at least with respect to the specific policy changes implemented. There may be some mild degree of disappointment for those who were looking for a bigger package from the Governing Council. That was probably too much to hope for, however.” 

“We think EUR/USD should stay fairly firm, particularly if the hawkish bias persists. This is, however, more of a reflection of the broader USD right now than anything the ECB itself has done.”

“We are keeping an eye on intraday trendline resistance around 1.2130/35. We see this as a possible technical trigger for any possible extension higher. We would need to see a sustained move above 1.2147, however, to think that such a move might have longer legs.”