Euro Sinks as Draghi Hints at Additional QE

The euro sank today following the monetary policy meeting of the European Central Bank. While the monetary policy itself remained unchanged, ECB President Mario Draghi sent a stronger signal about the possibility of additional quantitative easing.

The ECB left interest rates unchanged at today’s meeting, including the benchmark interest rate on the main refinancing operations that remained at 0.05 percent. But the real downer for the euro was the comments from the President. Draghi sounded rather dovish in his assessment of the future:

While euro area domestic demand remains resilient, concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in financial and commodity markets continue to signal downside risks to the outlook for growth and inflation.

As a result, he suggested the possibility of further monetary easing in December:

In this context, the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new Eurosystem staff macroeconomic projections will be available.

It is worth noting that some voting members of the ECB governing council are reluctant to embark on additional QE, preferring to wait for the current stimulating measures to take the full effect. Still, prospects for stronger stimulus are very bearish for the shared 19-nation currency, hammering it down.

EUR/USD tumbled 1.3 percent from 1.1336 to 1.1189 as of 13:22 GMT today, trading near the lowest since October 6. EUR/GBP sank 1.1 percent from 0.7352 to 0.7264 and was near the weakest rate since September 23. EUR/JPY also dropped 1.1 percent from 135.97 to 134.42, the low not seen since October 6.

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