The ECB meeting disappointed markets as they were expecting a more hawkish stance from the ECB. Even though it was priced in that the QE would be largely extended, the bond purchase program will now be extended until next September, the amount has only been cut in half. In other words the ECB will inject 270 billion euros in the market for the first nine months of 2018. This has to be compared with the 720 billion euros that have been injected this year. The ECB current monetary policy is then going to continue to be massive. The monetary policy divergence between the US and Europe is set to widen.
The EURUSD took a hit, as markets were awaiting a stronger adjustment of the monetary policy. The pair lost almost two figures from 1.18 to 1.16 after the press conference. Draghi appeared very cautious by saying that the end of the QE would require some more time despite his optimism regarding the Eurozone recovery. The end of the QE easing is definitely not for now and markets punished the single currency. More downside on the euro appears now very likely.
By Yann Quelenn