Image source: Marian Vejcik © 123RF.com
The Governing Council of the European Central Bank decided on Thursday to maintain the primary interest rate and refinancing operations unchanged at 0.00 per cent.
Additionally, the interest rates on the marginal lending facility and the deposit facility were also kept unchanged at their current rates: 0.25 and -0.50 per cent, respectively.
Тhe Council's decisions are dictated by subdued inflation that is observed across the member states of the bloc.
Seemingly the ECB relies on its increasingly accommodative monetary policy to secure price stability, while the interest rate oriented policy appears to be given a secondary role.
The Governing Council expressed its desire to push the inflationary pressures close to, but below, its 2 per cent projection horizon once again. Presently the inflation rate in the EU is at 1.2 per cent, as measured for September.
EU Inflation Rate. Image source: TradingEconomics.com
To tackle the waning inflation, the ECB intends to reinstate its asset purchasing program, which is designed to boost the overall liquidity within the economy and ensure the easiness of borrowing.
According to the central bank’s most recent monetary policy stance :
“As decided at the last Governing Council meeting in September, net purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.”
Overall, ECB’s decision from Thursday neither surprised the market nor does it divert from the long-term plans of the Governing Council’s members, that have been outlined in previous meetings.
The EURUSD’s reaction to the monetary decision was somewhat muted, and the pair fell only by 0.23 per cent during Thursday’s trading session.
Notwithstanding, the entire week has been a tough one for the euro as the ongoing Brexit negotiations have exerted a heavy toll on the EUR/USD.
In our Weekly Expectations update from Monday, we argued that:
“[..] uncertainty surrounding Brexit will return on Monday as the market opens, and the Euro is likely to correct some of the gains it registered last week.”
Consequently, the entire week’s trading action has been a corrective swing against the general direction of the trend.
The price is now reaching the major support level at 1.10906, which is also the 38.2 per cent Fibonacci Retracement Level.
EURUSD 1D Chart. Image source: Trendsharks ©, created with TradingView.com
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