EUR/USD : The pair is closer to 1.17 after a press conference very Dovish


Mario Draghi has managed to be more Dovish than the consensus had anticipated. Result : The Euro opens down over the forex.

The first thing to remember is that the QE (Quantitative Easing) is going to spend 30 Bn per month in 2018, compared to 60 Mds currently. The second thing is that the QE is extended until September 2018.

It is more or less what had been anticipated in the markets. On the other hand, two things are important addition to these decisions of monetary policies.

— The reinvestments will continue well after the end of the net purchases of the QE. This means that the ECB will continue to purchase the debt even after the QE is officially ended. Indeed, it is to reinvest the money gleaned each time a part of its stock of debt reaches maturity.

— The end of QE remains «open» (open-ended in English, to use the exact words of Mario Draghi). And saw that the president of the ECB has suggested that the QE will not end abruptly in September 2018, it is as if he had announced that there will be a new QE after a Seven-2018…

This last point has completed to convince the bear to go and get a new low on EUR/USD.

Other factors to bear :

— The ECB is very worried with the developments in Catalonia.

— Draghi stressed that the inflation will not be in the nails for several years and that as long as this will be the case, the ECB reserves the right to conduct an accommodative monetary policy.

— The vast majority of the governor prefers to keep the date of the end of QE open

— The growth also depends on the exchange rate (suggesting that a rise in the Euro could undermine the growth and force the ECB to increase QE…)

In short, the ECB continues to operate the printing presses. And the real reason for this is that the banks have pushed the system to its limits and that they now have a need for cash fresh. On the other hand it also acts to lower the Euro to be able to export more and thus boost growth so important when debts are so high. The currency war continues and this conference should leave traces on EUR/USD which is currently to go under 1.17.

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