Euro Rises as ECB Keeps Rates on Hold With All Eyes on Draghi

  • Shared currency stays near six-month high versus dollar
  • Attention now shifts to Draghi's press conference in Frankfurt

ECB Holds Steady on Interest Rates, Bond-Buying Program

The euro rose after the European Central Bank kept its main interest rates on hold, as expected by every economist surveyed by Bloomberg.

The 19-nation currency approached a six-month high versus the dollar as the ECB announced it would also keep its asset-purchase program at 80 billion euros ($91 billion) a month. All eyes will now be on central-bank President Mario Draghi, who’s scheduled to speak at a press conference at 2:30 p.m. in Frankfurt and who some strategists have suggested may try to talk down the euro to prevent its recent gains from hurting growth.

“The euro traded higher as there was some, albeit limited, expectation of a further move on asset purchases or rates,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “Some data also suggested the euro-area economy may have turned a corner or stopped getting worse. The market will wait to see if Draghi will talk the euro down. I don’t expect any aggressive form of action.”

The euro rose 0.4 percent to $1.1336 as of 1:02 p.m. in London, having climbed to $1.1465 on April 12, the highest since October.

The single currency is up 3 percent since the last ECB decision on March 10, even after officials cut both the main refinancing rate and the deposit rate, and expanded bond purchases under quantitative easing. Its resilience is partly because the Federal Reserve has signaled it will take a gradual approach to policy tightening in the U.S.

Stabilizing Economy

There are also signs that the region’s economy has stabilized. The jobless rate slid to the lowest level in more than four years in February to 10.3 percent. While that’s still more than double the U.S. rate, and masks far higher levels in peripheral member states such as Spain, it’s coming down faster than economists had predicted.

One-month implied volatility, a measure of anticipated price swings for the euro-dollar rate, fell to the lowest since December 2014 amid speculation there’ll be few major policy surprises this month from either the ECB or the Fed. While few analysts expect concrete measures at Draghi’s press conference, they’ll be listening for hints of future action that may drive the currency lower.

“People will wait to hear what the ECB says,” Carl Hammer, chief foreign-exchange strategist at SEB AB in Stockholm, said before the rates decision. “I guess they’re not happy with the euro’s recent appreciation and might take this opportunity to talk down the currency.”

Before it's here, it's on the Bloomberg Terminal.