Expectations were low heading into this month’s ECB press conference — and Draghi delivered — but he took some steps to weaken the euro without committing to anything new.

The market wasn’t looking for much as it’s widely believed that the ECB wants some time to evaluate negative deposit rates and the TLTROs before doing anything more.

A few headlines helped the euro climb to a session high of 1.3394 during the press conference:

  1. The main incremental shift would have been a lower outlook on inflation, that would have signaled a higher likelihood of action around the end of the year. Instead, Draghi re-emphasized that inflation risks are broadly balanced.
  2. He said credit growth and origination is ‘less bad’ than it was
  3. He said low inflation wasn’t a surprise, it was mostly due to low energy prices

The declines in the euro came on three separate headlines and show that the market is (rightly) focused on ECB quantitative easing.

  1. The ECB has intensified preparatory work on ABS purchases.
  2. Draghi was asked if he intends to implement ABS buying and said they’re working on the preparations for purchases in the expectations that the ECB will go ahead with them, although a final decision hasn’t been taken.
  3. An emphasis that the eurozone will stay on a more dovish monetary policy path than the US and other for a long time

On the net, Draghi obviously wasn’t going to have the opportunity to introduce anything new but he did a good job of staying dovish. He also made a sales pitch for why the euro should be lower and that had some effect. Without any true jawboning he proved once again that he knows some clever ways to keep downward pressure on the euro.

After the press conference the euro fell to a session low of 1.3342. Lots of talk about a barrier at 1.3325.

Draghi Aug 7 2014

Draghi today