Comments from the ECB President:

  • The ECB doesn’t want to help banks that are failing
  • Monetary policy can’t address roots of crisis
  • ECB policy only partly passed on to firms and households
  • There are reasons for confidence in the euro area
  • ECB policy will continue to help within mandate
  • Our monetary policy stance is very accommodative

EUR/USD has slid back to 1.3080 following the comments but it’s difficult to dissect what’s behind it. Draghi didn’t close the door to a rate cut here and that could be construed as dovish but it’s a stretch.

The theme from speech, aside from the headlines, is similar to recent speeches from other members of the Governing Council — the cost of lending to SMEs (small and medium-sized enterprises). The ECB is pushing this problem up the agenda and it wouldn’t be a surprise to start hearing rumors of creative programs to help.

We’ll have to wait and see the content of the rumors, but generally any action is viewed as dovish and will hurt the euro.