Yesterday we looked at the high probability of the European Central Bank taking a dovish outlook to markets at today’s rate decision and press conference. This very much fit the pattern of how the bank has communicated with markets throughout this year, as the ECB rate decisions in April and again in June saw a rather dovish outlook despite the rising growth and inflation figures that had been seen in the bloc.

At today’s meeting, Mr. Draghi echoed the prior comment that the bank stands ready to increase the size and duration of asset purchases, while also saying that measures of underlying inflation remain low and that a ‘very substantial’ degree of accommodation is still needed in the euro area. This is all very dovish, especially for an economy that’s been showing continuing signs of improvement. As the icing on top, Mr. Draghi also said that tapering QE has not yet been discussed…

But as we had asked in yesterday’s article – the bigger question is whether or not this would ‘work’ in bringing the value of the Euro-lower. In April and then again in June, we saw a bit of weakness develop in the Euro after those dovish pleas from Mario Draghi. But buyers came-in at support around each instance, and within weeks the Euro was flying-higher again. At this morning’s meeting, the Euro put in a test of support around 1.1480 before Mr. Draghi took the podium, at which point bulls took over to re-drive prices back towards prior highs. Bulls were rather active, showing that few in markets were believing that the ECB is going to remain as dovish as they appear.

EUR/USD had put in two days of retracement after setting a fresh 2017 highs around 1.1580. Support showed-up 100 pips lower, and as Mr. Draghi began speaking – the pair began to rip-higher, highlighting that despite Mr. Draghi’s dovish pleas, markets are expecting the ECB to get ‘less loose’ at future policy decisions.