11 March 2016
Understanding the Point of the ECB's Actions
The euro is paring the recovery that began in the middle of the ECB's press conference yesterday. The market reaction was one intuitively expected to broad easing of interest rates and credit conditions.
The market reversed, and violently so, only after Draghi seemed to rule out further interest rate cuts. Many investors took this to mean the ECB had gone all in and that monetary policy had reached the end. We do not expect this interpretation to be sustained.