The Euro depreciated against the US dollar and the same fate befell European zone bond yields which also fell after the European Central Bank chose not to signal any meaningful change in its policy stance after its permanent council meeting on Thursday.
The Euro depreciated by 0.86% against the US dollar to a trading level of 1.0791. The US dollar index, which measures the US dollar against six major currencies, strengthened 0.62% to trade level of 100.526. The Euro had depreciated before the ECB announced its policy decision again and extended the depreciation after the announcement.
As expected the ECB decided to maintain its policy practices with official interest rates unchanged. Eurozone 10 -year bond yields mostly fell by 1 or 2 basis points.
The meeting is the last scheduled opportunity for eight weeks for the ECB to respond to the significant and increasingly worrying surge in inflation, when it had hit 7.5% in March. This reading is the highest since 1999.
The ECB stated in its meeting that it intends to end net bond purchases in the third quarter. However, noting the huge uncertainty for the European zone economy triggered by the war in Ukraine, the ECB noted that the rate hike was dependent on data at the time.
In the current situation of high uncertainty, the Governing Council will maintain choice, gradualism and flexibility in the conduct of monetary policy. The Governing Council will take whatever action is necessary to fulfill the ECB's mandate in pursuing price stability and maintaining financial stability. ”
The ECB set the goal of price stability can only be said to be achieved when the inflation rate is 2% in the medium term.
