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The Euro Rallied after Mario Draghi’s Press Conference

David Meyer

The Euro's 60 Minutes of Fame after Key ECB Policy Decisions

(Continued from Prior Part)

Major takeaways from the press conference

European Central Bank (or ECB) chief, Mario Draghi, conducted his scheduled press conference 45 minutes after the announcement of the change in deposit rates. Listed below are some of the major takeaways from the press conference. Some of the ECB’s key moves included the following:

  • lowered the deposit rate by ten basis points to -0.30%
  • extended the asset purchase program to March 2017 or beyond
  • decided to reinvest principal payments from the asset purchase program as they mature for as long as necessary
  • decided the asset purchase program will include debt issued by regional and local government in the Eurozone
  • Planned to continue the open market operations of ECB including MRO (main refinance operation) and three-month LTRO (longer-term refinancing operations)

Euro movement after press conference

The euro to US Dollar pair continued its upward movement, which had started before the press conference. The market seemed to think that the ECB actions didn’t meet expectations. The ECB chief, Mario Draghi, is usually known to over deliver, but this time the ECB’s less-than-expected actions resulted in the euro bouncing back. The euro went up to 1.1 after the press conference. The rise in unemployment claims in the US also complemented the uptick in the currency pair.

Impact on the market

Looking at the performance of currency-based ETFs linked to the euro on December 3, 2015, the ProShares UltraShort Euro ETF (EUO) fell by 5.6%. EUO is inversely linked to the euro. In contrast, the Guggenheim Currency Shares Euro ETF (FXE) has a direct relationship to the euro. FXE rose by 2.9%.

The German ADRs (American depositary receipts) trading on US exchanges were on a major negative bias. SAP AG (SAP) fell by 1.1%. Deutsche Bank (DB) had a slight rise of 0.28% while the Belgian beverage maker Anheuser-Busch (BUD) fell by 0.43%.

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