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Euro weakens following ECB announcement

Euro weakens following ECB announcement
08/03/2019

Mario Draghi's speech made a stir in the markets

Yesterday, the European Central Bank was meeting and was not really optimistic.

Indeed, the monetary institution is reviewing its forecasts of economic growth for 2019 (1.1% instead of 1.7%), 2020 (1.6% instead of 1.7%) and maintains its rate for 2021 (1.5%). It was also lowered its inflation forecast for the same three years: 1.2% instead of 1.6% for 2019, 1.5% instead of 1.7% for 2020 and 1.6% instead of 1.8% for 2021.

In addition, it has announced to postpone its forecast for 2020 and thus extend its accommodative monetary policy. The ECB also announced that banks will be able to refinance then self with new loans.

In his announcement, Mario Draghi also declared: "We are in a period of persistent weakness and general uncertainty" and "In a dark room, you move slowly. You do not run but you move”.

These two sentences still resonate in the minds of investors and stock markets. Indeed, they sound like a confession of powerlessness of the monetary institution to stimulate the economy in the face regards with its loss of speed.

Mario Draghi's measures and statements of powerlessness caused trouble on the stock markets and drove the Euro down against other currencies.

If we look at the EURUSD price for example, we see that, following the announcement, it went from 1.1310 (around 12.00) to 1.1177 (around 18.00). The Euro has lost nearly 130 points or more than 1% against the US dollar in a single session following this meeting.