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EUR/USD Eases as the ECB Warns of Subdued Inflation and Reports a Dovish Outlook

January 19, 2017 at 17:57 by Simon Mugo

Euro sign monumentThe European Central Bank announced that it would be maintaining its interest rates while continuing with its bond-buying program for the rest of 2017. The ECB reported that it would be keeping its base refinancing rate unchanged at 0.0%, its marginal lending facility at 0.25%, and its deposit facility rate at -0.40%.

The EUR/USD currency pair lost almost 0.2% after remarks by Mario Draghi, the ECB President, indicated that the institution had a dovish outlook for 2017.

Mario Draghi commented that the inflation pressures across the EU block were quite subdued as there was no upward trend in consumer prices. He also announced that the ECB’s quantitative easing program in the form of the bond buy-back program would continue for the rest of the year as part of its overall stimulus program.

The currency pair was also affected by positive market sentiment towards the US dollar as investors look forward to the greenback resuming its bullish run after the inauguration of Donald Trump tomorrow.

Although the ECB plans to reduce its asset purchases to €60 billion per month starting in April, the bank is keeping an open door policy regarding the same hoping to reduce the likelihood of a ‘taper tantrum.’

The EUR/USD currency pair was trading at 1.0616 as at 17:36 GMT having tested lows of 1.0587 immediately after the announcement. The EUR/GBP pair was trading at 0.8639 after hitting a low of 0.8608 after the Mario Draghi’s remarks.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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