European Central Bank Mario Draghi has become synonymous with talking down the euro during his press conferences without announcing or committing to any actual easing in monetary policy, and today he has once again lived up to this reputation.
Draghi’s comments managed to wipe more than one cent off EURUSD during his speech, now down 1.35% on the day, after hinting that further stimulus could come in December when the central bank releases its latest economic projections.
The suggestion doesn’t entirely come as a surprise – it has been touted a lot in recent weeks – but until now that has been purely speculation. The fact that “a few” members of the governing council “hinted” at acting today would support a December policy move as they are clearly not too far away from being in agreement.
Moreover, Draghi confirmed that further deposit rate cuts were discussed, despite claiming last year that this has now reached its lower bound. This may have suggested that concerns over its ability to expand the quantitative easing program are valid, but Draghi did confirm that this perceived scarcity does not exist. That was enough to send German 2-year yields to all-time lows, a clear message that Draghi has spoken and the market has listened.
Source – Thomson Reuters Eikon
While the deposit rate does appear to be back on the table now and is likely to become the preferred stimulus option, as far as markets are concerned, the ECB is clearly open to many different easing options. While the tool of choice isn’t clear, what does appear to be is that December is when it will happen.
For a look at all of today’s economic events, check out our economic calendar.