News & analysis

Today’s ECB presser should have been a predictable affair, but instead, an anonymously sourced story released as the press conference began sent the euro on a tear. This begs the question: should we listen to official ECB communications, or will market-moving information about ECB discussions be released to select media on an ad-hoc and privileged basis?

Addressing the recent euro strength and a possible ECB response, Lagarde gave cookie-cutter statements that would not have been out of place in previous ECB communications, saying that the exchange rate was being monitored but was not a policy target. However, just as the press conference was beginning Bloomberg published an anonymous story saying the ECB had agreed that there is no need to “overreact” to euro gains. This astonishing story prompted the euro to immediately rally.

Lagarde did not say anything as clear as this during the press conference, and if anything was looking to play by the book on the topic of the euro, reiterating standard answers that would not be out of place in any central bank communications. The optimistic tone of the opening statement, the upwards revisions to several key forecasts, and the lack of discussion about further expansions to PEPP mean that at the margin it was a an optimistic, even slightly hawkish press conference. However, the timing of the euro rally clearly coincided with the Bloomberg story, which was its most likely cause.

The ECB must now move quickly to confirm or deny the reports about “agreement” on not overreacting to the exchange rate.

If the report is denied, the euro may pare back some of its recent gains. If it is confirmed, the ECB has some serious questions to answer about why this information was released on a privileged basis during an official press conference.




Author: Ranko Berich, Head of Market Analysis


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