European session review: EUR mixed, as investors digest ECB latest monetary policy statement

EUR traded mixed against its major rivals in the European session on Thursday after the release of the European Central Bank’s (ECB) monetary policy statement, which, in general, provided little new information for market participants. The single European currency rose against USD, JPY and GBP, but fell against CHF, AUD, NZD and CAD.

At the March meeting, the ECB’s policymakers decided to take no action on interest rates or monetary stimulus, as widely expected. The Bank’s main refinancing rate, marginal lending facility rate and the deposit facility rate were left unchanged at  0.00 percent, 0.25 percent and -0.50 percent, respectively. The ECB’s officials also repeated their pledge to continue the purchases under pandemic emergency purchase program (PEPP) with a total envelope of EUR1,850 billion until at least end of March 2022. However, the policymakers added that it is expected “the purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year”. Moreover, it was noted that “if favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.” The Bank also repeated its promise to continue to provide ample liquidity through its refinancing operations (in particular, TLTRO III) as well as to continue purchases under the asset purchase program (APP) at a monthly pace of EUR20 billion.

The announced outcomes of the ECB’s latest meeting were in line with investors’ expectations. 

Market participants’ attention is now turning towards the press conference by the ECB’s President Christine Lagar (due at 13:30 GMT), during which she is expected to provide more clarity on the ECB’s signals of stepping up the PEPP purchases.