Euro Sinks As ECB Says No Interest Rate Hikes in 2018

The euro dipped today following the European Central Bank policy meeting as the ECB signaled that it is not going to raise interest rates in 2018 — a message that markets did not like.

The central bank made a policy decision today, keeping its monetary policy unchanged, as was widely expected. The ECB stated that it expects that the quantitative easing program will stay in place till the end of the year:

First, as regards non-standard monetary policy measures, the Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of â‚¬30 billion until the end of September 2018. The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council’s medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to â‚¬15 billion until the end of December 2018 and that net purchases will then end.

But what really drew traders’ attention was the following statement, which seriously damaged the euro:

The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path.

As for economic reports in the eurozone, final estimates of German and French inflation came out the same as the preliminary estimates and within market expectations. The German Consumer Price Index rose 0.5% and the French CPI rose 0.4% in May from April.

EUR/USD slumped from 1.1791 to 1.1641 as of 16:55 GMT today after rallying to the high of 1.1852 intraday. EUR/JPY tanked from 130.09 to 128.53. EUR/GBP dropped from 0.8815 to 0.8748, and its daily low was at 0.8724.

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