EUR/USD jumps to a session high of 1.1272
It's all very hectic as traders scramble to price in the changes in the ECB statement. The two key takeaways for me is that:
1. Change in forward guidance for rates to stay on hold to 1H 2020
2. More generous TLTRO terms than markets were expecting
In the grand scheme of things, I don't really believe the TLTRO conditions make a major difference to the euro. Sure, the terms are more generous but it is more of a compromise between banks who wanted more stimulus and those on the ECB board that are worried about banks getting overly reliant on ECB funding.
The change in the forward guidance in my view presents a bit of a conundrum. While the move in itself is no doubt dovish, the fact is that markets had already priced in a 10 bps rate cut by the ECB for March 2020. What happens to that now?
There's a good case of short covering in anticipation of something more dovish but we'll have to wait on Draghi to deliver on that front instead. Right now, the euro is riding off gains as the rates market will need to do some rethinking on when the ECB will act next.
For EUR/USD, it's all about testing that 100-day moving average @ 1.1276 again. That remains the key point of focus in trading today. But for now, it's over to Draghi to decide what happens next: