The EUR has lost value this afternoon, following comment made by European Central Bank (ECB) President Mario Draghi.
Draghi’s much anticipated address followed the latest ECB interest rate decision, and outlined the central bank’s monetary policy plans moving forward.
This economic release has been investors main focus this week, with many expecting it to strengthen the EUR position.
Interest rates were kept on hold at 0% as expected but the key point was whether the ECB would taper their current monetary stimulus (QE) programme.
Investors who had bet on this would have been initially relieved, as Draghi confirmed that they were reducing their current monthly injection from 60bn to 30bn. He also confirmed that they would extend the programme to 2018 but the reality is it will likely go beyond this date.
On the face of it, this was exactly what the markets had been hoping and expecting, however the EUR weakened against both the Pound & USD.
In my opinion, this can be attributed to some very dovish comments Draghi made regarding the chances of an interest rate hike for the Eurozone. In fact, he claimed a rate hike may be detrimental to the Eurozone’s continued economic recovery and as such, investors have pulled funds away from the EUR.
Whilst the markets can sometimes overreact to these type of economic releases, I would now be looking to protect any short-term EUR sell positions around the currency rates. The EUR is still trading at extremely attractive levels against both Sterling and the greenback, especially when you consider the recent history on each pair.
With the US economy striding forward and the Bank of England likely to raise interest rates in the UK at their policy meeting next Thursday, now could be the time to take advantage.
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