Forex News – Euro recovers after Draghi press conference

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The European Central Bank left interest rates unchanged at 1 percent on Wednesday, mostly expected by the markets. However, investors were mostly focused on President Mario Draghi’s press conference that followed with hopes that he would announce further crisis-fighting measures. Unfortunately, Draghi played down prospects of a third round of long-term money creation and  put the responsibility firmly on euro zone governments to solve the bloc’s debt crisis.

Draghi warned that growth remains weak and said the economic outlook was subject to increased negative risks relating to possibly higher commodity prices. But he didn’t announce any three-year lending operations as some had hoped and instead said the bank would extend its policy of lending to banks as much as they want for periods of up to three months.

When asked why the rate-setting council hadn’t announced a new injection of three-year money, which had succeeded in unblocking markets around the turn of this year, Mr. Draghi said that the effects of the first two operations hadn’t yet played out fully.

His cautious tone caused euro to slip against other major currencies but EURUSD soon rebounded to recover some losses to trade back above $1.25.