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Euro Rallies Ahead of ECB Rate Decision, Drops on Dovish Draghi Speech

December 13, 2018 at 17:44 by Simon Mugo

Counting 50-euro billsThe euro today rallied before the European Central Bank rate announcement, but dropped lower after the dovish comments made by the ECB President following the announcement. The pair headed lower in the American session despite the release of disappointing American macro data.

The EUR/USD currency pair today dropped from a high of 1.1393 to a low of 1.1330 following the dovish Draghi comments.

The currency pair was in a consolidative during the Asian session, but broke out of it in the early European session with most analysts attributing the spike to the weak US dollar. Another reason behind the spike could be the release of the German consumer price index data for November by the Federal Statistical Office. The CPI print came in at 0.1% translating into an annualized 2.3% and both prints met expectations. The pair stayed within this range as markets awaited the ECB monetary policy decision scheduled for 12:45 GMT. The ECB kept its base rate at 0.00%, while the marginal lending facility was maintained at 0.25%; the deposit facility rate was kept at -0.40%.

The dovish comments by ECB President Mario Draghi after the announcement where he stated that recent inflation data was weak and that the eurozone faced numerous downside risks drove the pair lower. The ECB also said that it would terminate its quantitative easing program at the end of this month.

The pair’s short-term performance is likely to be affected by tomorrow’s eurozone PMI releases and US retail sales data.

The EUR/USD currency pair was trading at 1.1355 as at 17:32 GMT having recovered from a low of 1.1330. The EUR/JPY currency pair was trading at 129.04 having rallied from a low of 128.69.

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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