EUR/USD subdued as ECB maintains rates and PEPP size

ECB shows signs it will begin withdrawing assistance

The European Central Bank (ECB) confirmed on Thursday that it is scaling back its bond puchases over the next three months.

It is a sign that the EU will now slightly withdraw the aid it provided to the eurozone in an effort to support the economy during the coronavirus pandemic.

The ECB left no stone unturned last year in an effort to achieve growth. Now, with the subsequent levels of inflation and growth, senior officials at the central bank have been under pressure to dial back the measures.

Ahead of the ECB’s monetary policy meeting today, opinion was divided over what the outcome would be an its impact on the Euro.

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Since the end of august the Euro has been outperforming the US dollar, however, only to a limited extent.

There was a subdued response from the Euro following the ECB’s announcement today

Commenting on the market reaction as attention turns to President Lagarde’s press conference, Shane O’Neill, Head of Interest Rates at Validus Risk Management, said: “As expected, the ECB did not change its main interest rates or the size of its PEPP envelope, which remains at EUR1,850 billion. The PEPP will continue until at least March 2022, but the monthly pace of purchases will be adjusted to a “moderately” slower pace compared to the current EUR80bio/month.”

“EURUSD is virtually unchanged on the news and market attention will now turn to the press conference, where President Lagarde is sure to receive many questions on the specifics on the PEPP going forward.”

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