EUR/USD update (6th Sep 2012, 16:30)

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by Market Moves Staff

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The euro lost ground against the US dollar in the wake of the ECB decision and press conference, as some of the euphoria surrounding today was taken out of the market.

The euro remained fairly unmoved against the dollar for most of the morning, an understandable state of affairs given the imminent ECB meeting. In the event, there wasn't too much more information, although Mr Draghi did provide a greater degree of detail on how and when ECB bond-buying would be activated (and, indeed, when it might be stopped). However, it seems that EUR/USD had been hoping for even more than was published, something that had always been a possibility given the high pitch that expectations had reached in the run-up to the meeting. The bond-buying programme is likely to be unlimited in scope, targeting shorter-term bonds (up to three years), in a bid to cut borrowing costs.

The ECB also gave a fairly downbeat assessment of the outlook for the European economy, with growth forecast to be between -0.4% and -1.4%. This suggests that, even if the ECB is not forced to rescue other countries, the eurozone faces difficult times ahead. Perhaps then it was this, rather than any lack of additional detail on the bond-buying programme, that really disappointed investors.

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