- ECB slashes 2019 growth forecast.
- ECB says no rate hike is expected until end of 2019.
- US Dollar Index rallies to fresh 2019 highs above 97.30.
With the shared currency suffering heavy losses against its rivals amid the European Central Bank’s surprise dovish shift in its monetary policy statement, the EUR/USD pair slumped to its lowest level since November 13 at 1.1229. As of writing, the pair was trading at 1.1235, losing 0.6% on a daily basis.
At its March meeting, the ECB decided to leave the interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.40%, respectively, as expected. However, the ECB also changed its forward guidance on interest rates and said that rates were now expected to remain at their present level at least “until the end of 2019” rather than “end of summer”. Additionally, in the press conference, President Draghi announced that the ECB slashed the 2019 growth forecast to 1.1% from 1.7% reported in December.
Moreover, “A new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021,” the ECB announced to put additional weight on the shared currency’s shoulders.
Commenting on the ECB’s announcements, “The ECB’s current strategy clearly follows the idea of “if you can’t beat it, try to avoid it for as long as possible”, hoping that today’s measure are sufficient to put a floor under the current economic slowdown. Any next step from here to tackle a severe downswing of the economy would now require unprecedented measures. In any way, today’s ECB meeting clearly means that Mario Draghi will be the first ECB president who never hiked interest rates during his term in office,” ING analysts summarized.
The sharp fall seen in the pair boosted the demand for the greenback and the US Dollar Index rose to its highest level of 2019 at 97.36 in the last minutes, adding nearly 0.5% on a daily basis.
Key technical levels
The initial support for the pair is located at 1.1220 (Nov. 13/Nov. 12, 2018, low) ahead of 1.1165 (Jun. 20, 2017, low) and 1.1100 (psychological level/May 19, 2017, low). On the upside, resistances align at 1.1330 (20-DMA), 1.1375 (100-DMA), and 1.1420 (Feb. 28 high).