10.09.202111:33 Forex Analysis & Reviews: EUR after Governing Council meeting

The euro managed not only to stay firm after the ECB's Governing Council meeting but also to rise for a short while. At the same time, the greenback experienced volatility, which was reflected in a moderate fluctuation in its rate.

For several weeks, the world's two largest regulators, the ECB and the Fed, seemed to have been competing against each other for the right to start tapering faster and with minimal losses. However, there are no winners in this race, since the state of their economies is different. The US economy is believed to be ahead of the European one in terms of recovery from the crisis induced by the COVID-19 pandemic. At the same time, they both have their advantages to compensate for the current failures.

The ECB's Governing Council meeting did not affect the euro. As soon as the results were published, EUR rose and then dropped slightly. Later, the euro achieved relative stability in the exchange rate by the end of this week. Early on September 10, EUR/USD was trading at 1.1830.

The ECB said it would slow down the pace of asset purchases. "The Governing Council will continue to conduct net asset purchases under the PEPP with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25%, and -0.50% respectively."

While being cautious about cutting incentives, the central bank confirmed its willingness to return to stimulus programs if the economic environment changes. Along with the reduction in the rate of bond purchases, the ECB raised its own inflation forecast. Many market participants and analysts are convinced that the regulator will announce the end of the PEPP in December 2021 as planned. As a reminder, the PEPP is due in March 2022.

In this light, the euro rose above the intraday high of 1.1840 on Thursday. The 50-day moving average is located around 1.1800. The nearest target for the pair is seen at 1.1900.

According to analysts, the ECB's current actions pave the way for a loose monetary policy stance in the long term. This will help stabilize the eurozone's economy and boost the euro.