Draghi strikes an upbeat tone
The euro climbed 80 pips in the aftermath of the ECB decision and Mario Draghi's press conference but about a third of that is due to broad US dollar weakness following a CPI report released at the same time Draghi started talking.
In order to understand the rest of the move, you need to understand what was expected and what was feared.
The expectation was for a downgrade in growth forecasts. Yesterday, leaks suggested marginally lower growth forecasts but every tick matters. The result was a slight downgrade this year to 2.0% from 2.1% and next year to 1.8% from 1.9% with no change to 2020. That's about the best that could have been expected. Inflation forecasts were unmoved.
Some pessimism or caution was also expected because eurozone data has been soft lately. However despite some token commentary on emerging market and trade risks, Draghi was entirely upbeat.
What was feared was some kind of change in guidance to something more dovish. The risk was that because of soft data and risks, Draghi would push out the timeline for a rate hike from around this time next year to later. That didn't happen.
Instead, Draghi repeatedly emphasized strong underlying momentum in the economy. The balance of risks on growth was also left unchanged.
So the takeaway is that none of the fears or expectations of caution materialized and instead Draghi was upbeat about the economy and growth. EUR/USD is closing in on 1.1700 from 1.1620 before the press conference.
