ECB Left Rates Steady, Draghi Keeps Door Open

The ECB kept rates on hold, as the consensus had expected.  Draghi's press conference has kept the door open to further action.   The euro has responded by shedding its earlier gains, ostensibly on signs that the ECB does not recognize the sense of urgency.  

Draghi make a couple of minor tweaks in policy.  He confirmed the continuation of full allotment refinancing until at least mid-Jan 2013 and that three-month funds will be available to then as well.  He recognized the downside risks to growth in the current quarter and the downside risks to the outlook. 

Yet it is disappointing that the staff's forecast growth were not trimmed and inflation projections were actually raised a little.   That reinforces the sense that the ECB does not appreciate the economic plight facing Europe and the political and social consequences. 

Despite the disappointment and the paring of the euro's gains, I look for it to bounce back provided the $1.2420-40 area holds.   A move back above $1.2480 would strengthen my sense that the upside correction in the euro will survive the disappointment from the ECB. 

Separately, sterling has tracked the euro's pullback.  Support is seen near $1.5440-50 and provided this holds the correction looks intact. 
ECB Left Rates Steady, Draghi Keeps Door Open ECB Left Rates Steady, Draghi Keeps Door Open Reviewed by Marc Chandler on June 06, 2012 Rating: 5
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