Draghi Debrief: Confidence On Growth Sends The EUR/USD Higher

27 April, 2018, 00:49 | Author: Darnell Patrick
  • European Central Bank leaves interest rate unchanged, despite slowing of EU economic growth

Regarding non-standard monetary policy measures, the European Central Bank reaffirmed the decision made at the last governing council meeting, that it will continue to make net asset purchases at a monthly pace of 30 billion euro from January 2018 until the end of September 2018, or beyond, if necessary.

Draghi warned that rising protectionism was starting to pose a "more prominent" risk to the eurozone outlook after US President Donald Trump fanned fears of a global trade war.

While 2018 growth forecasts were unchanged at 2.3%, most economists polled said the trade dispute between the USA and China would also damage the euro zone economy. It is up around 1.5 percent against the US dollar so far this year and was trading at $1.2155 shortly after 1 p.m. London time.

"The ECB didn't actually do much this Thursday - and that was maybe the problem".

Overall, Mr. Draghi signaled that the central bank hasn't been thrown into a panic by the unexpected loss of momentum in the first three months of the year, but nor did he rule out the possibility that it was more than a blip.

This leaves the door open to ending lavish bond purchases by the close of the year.


Antoine Lesné, a global advisor at State Street argued that the relative slowness of the European Central Bank in officially recognizing the slowdown was indicative of a fairly large hawkish contingent on the governing council still keen to end QE.

However, Draghi also discussed the prospect of a Eurozone slowdown.

Draghi told his press conference that while the economic effects of the current tensions so far did not appear to be substantial, it remained unclear what might be the fallout from any retaliation sparked by the US' protectionist stance. If the latter - demand led - then it would have grosser implications for monetary policy. He nevertheless added the proviso that there were some feint positive signs in nominal wage growth which might support higher inflation in coming months.

Draghi is set to hold his press conference at 8.30 am ET in Frankfurt, when reporters are expected to quiz him regarding the trade war concerns and softening growth in the region.

This suggests the euro zone's economic downturn was more severe than earlier thought and makes the recovery even more protracted.

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