ECB press conference throws markets into volatility

3rd December 2015 By: Ranko Berich

ECB Press Conference – 03/12/15

The ECB has delivered on the bare minimum of easing, implementing a small deposit rate cut and extending the current easing programme for six months, into 2017. In the hysteria following the dovish surprise one important point seems to have been missed: Draghi refused to rule out further deposit rate cuts. The reality is, the ECB could just be  getting started with this latest round of easing.

This smaller-than-expected move in monetary policy caused EURUSD to recover a full 3.5 per cent in mere minutes, as markets that have been aggressively pricing-in ECB action were thrown into volatility. The wild swing in the euro shows the extent to which markets have been pricing-in central bank action in recent weeks and how these sky high expectations are sparking volatility across G10 FX.

The week is far from over, and further euro strength is far from assured, especially against the US dollar. With several Fed decision makers indicating that they are willing to hike rates soon, tomorrow’s non-farm payrolls data could be the trigger for an even more violent reversal in the markets.