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Euro Falls on Draghi’s ECB Policy Comments

The Euro fell to 1.3329 against the US Dollar as the European session opened and briefly dropped to 0.8474 against the British Pound. The common currency’s declines were triggered by comments issued by European Central Bank President Mario Draghi.

This morning Draghi stated that the central bank is willing to implement non-standard policy tools if the economic situation in the Eurozone makes it necessary.

The ECB chief asserted: ‘We will look with an open mind at these measures that are especially effective in our institutional setup and that fall within our mandate. Some of those measures may have unintended consequences. This does not mean that they should not be used, but it does mean that we need to be aware of those consequences and manage them appropriately.’

During his speech in Jerusalem Draghi also remarked: ‘There are numerous other measures – standard interest rate policy and non-standard measures – that we can deploy and that we will deploy if circumstances warrant […] The ECB’s Governing Council has stressed that monetary policy will remain accommodative for as long as necessary. In the period ahead we will monitor very closely all incoming information on economic and monetary developments and stand ready to act if necessary.’

Earlier this year Draghi intimated that the central bank may consider instating a negative deposit rate.

In reference to the creation of a currency-bloc wide banking union Draghi noted: ‘It should provide an answer to many of the challenges currently facing the Euro area, including uneven credit conditions and the fragmentation of financial markets. Much work remains to be done for economic policy makers across Europe.’

Draghi also mentioned the ECB’s as yet untried Outright Monetary Transactions programme, under which the central bank could potentially purchase an unlimited number of bonds belonging to heavily indebted nations.

Although Draghi said that the introduction of the programme had gone a long way to defusing market tension, the legality of the OMT scheme is currently being questioned in the German constitutional court.

Additional Euro movement could occur today in response to the publication of the German and Eurozone ZEW economic sentiment surveys, due out at 10 am GMT.

Euro (EUR) Exchange Rates As of 08:50 –

The Euro/US Dollar Exchange Rate is currently in the region of: 1.3334 <

The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8513 >

The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.4083 >

The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6723 <

The Euro/ Canadian Dollar Exchange Rate is currently in the region of: 1.3598 <