Euro Falls After Draghi Says No Discussion of QE Boost or Taper

  • Shared currency surges, then drops, on Draghi’s remarks
  • Traders seen waiting until December for changes to ECB policy

Draghi: ECB Did Not Discuss QE Extension Beyond March

For the euro, it was more about what European Central Bank officials didn’t discuss at this week’s policy meeting than what they did.

The shared currency rose, then dropped to lowest since June 24, the day after the U.K. voted to leave the European Union. The whipsaw came as ECB President Mario Draghi said policy makers didn’t talk about extending or tapering the institution’s 1.7 trillion-euro ($1.9 trillion) quantitative-easing program. That leaves traders waiting until at least December for news about policy changes.

“I don’t think euro-dollar has much upside,” said Alessio de Longis, a New York-based money manager in OppenheimerFunds Inc.’s global multi-asset group. “We’ve been underweight all year” on the euro, and Draghi’s comments haven’t changed that position, he said.

The October decline has disrupted a calm that prevailed in the world’s most-traded currency pair. The euro has slipped 2.7 percent this month, after trading in its tightest quarterly range against the greenback on record in the three months through September. Deutsche Bank AG and Toronto-Dominion Bank expect euro weakness to gather momentum into year-end.

The single currency fell 0.4 percent to $1.0929 as of 5 p.m. in New York. It rose as much as 0.6 percent. It fell 0.1 percent to 113.61 yen.

Europe’s unprecedented QE plan was designed to spur inflation and economic growth. Stimulative monetary policy tends to weaken a currency, potentially benefiting a sluggish economy by making exports cheaper and boosting consumer prices. Draghi said on Thursday that an abrupt end to QE was unlikely.

The ECB left interest rates and its bond-buying plan unchanged, as predicted by economists in a Bloomberg survey.

“It’s a very volatile session,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London. “Because of what Draghi didn’t convey today, markets are starting to question how committed the ECB is to extending its current asset-purchase program beyond 2017.”

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