EUR/USD Jump Shows The Limit Of ECB Policy

EUR/USD jumped the most in 3 months in just 1 day after the ECB Press Conference in which ECB President Mario Draghi for the first time set one of the important deposit rate negative in an effort to depreciate EUR/USD. The exact opposite happend. EUR/USD appreciated. Did you read the post on allegations of currency market manipulation being investigated by UK Serious Fraud Office?

Now as said above, ECB made the interest rates negative. The idea was this will make EUR/USD weak. But instead the exact opposite happened and EUR/USD jumped up. Bank of Japan has also been using this policy of negative interest rates for many years. There also the results of this negative interest rate policy are mixed. In Europe, what this means is that ECB needs to do much more in order to convince the market that they should be selling EUR/USD. Right now the market seems to be saying in a loud voice we don’t care about your interest rate getting negative.

“The ECB is going to have to do more to convince the market that they should be selling euros,” said Steven Englander, the New York-based global head of Group of 10 foreign-exchange strategy at Citigroup Inc. “And in some ways it looks almost as if they don’t care.” Does it means ECB rates go even more low? Whatever, it seems that it is the policy of ECB to keep EURO weak. EUR/USD has been in a long term downtrend for many year now. Watch the video below that gives a long term forecast on EUR/USD!

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