With low market expectations around any action from the ECB, they were not disappointed. Policy was left untouched with a negative 20 bp deposit behavior. The weaker than expected April US Empire manufacturing survey (-1.19 vs 6.90 in March) helped break the euro’s downside momentum. It had poked through $1.07 in North America yesterday after the US retail sales report disappointed and had fallen back to $1.0570 in the European morning. The euro moved back above $1.06, but without much momentum as Draghi spoke, and continues to straddle that area.
Draghi made four points, none of which are surprising:
1. The cyclical recovery in the euro area has strengthened.
2. The asset purchase program has been successful.
3. It will continue until September 2016, at least, or until the market sees a sustained increase in inflation. The program is flexible.
4. The ECB is not experiencing operational difficulties in conducting the asset purchases. Concerns about bond scarcity are “premature.”
In response to a question, Draghi noted that the ECB has continued to support Greek banks through ELA, which it is willing to do, provided the banks are solvent and they have collateral. The ECB’s exposure is 110 bln euros, which is most relative to the country’s GDP.
It is difficult to call a press conference that was interrupted by a protester a “non-event,” but in terms of policy and outlook, there is no meaningful increase to investors’ information set.