Euro Sinks as Draghi Hints at December Easing

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.

EURUSD Daily

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.

German 2yr Yields

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.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.