The Euro swung from a sharp gain to a steep fall, on Thursday, December 8, after the European Central Bank,ECB, said it would begin tapering its massive monthly bond-buying program in April.
Moments after the announcement, the shared currency EURUSD, -1.2367% rose 0.7% to $1.0874, its highest level since Nov. 14.
However, it soon turned lower, falling more than 1% to a three-day low of $1.0663, as investors realized that the statement contained a mixed message of continued stimulus but at a lower level, which was viewed as both dovish and hawkish.
“The euro first rallied on the headline that the ECB would be reducing its purchases. The euro then fell on the headline that the ECB would be extending the purchases’ time horizon.
It has now settled around the $1.07 area as Draghi begins his Q&A,” said Doug Borthwick, managing director at Chapdelaine FX, a subsidiary of Tullett Prebon.
Draghi also said the ECB would be comfortable buying bonds with yields below the ECB’s deposit rate of minus 0.4%.
The ECB’s decision surprised many market strategists and investors who had expected the central bank to extend its program of buying public and private eurozone debt at its present pace of €80 billion ($80.6 billion) for most of 2017.
Instead, the central bank announced it would taper the program to €60 billion ($64 billion) beginning in April. The central bank also left interest rates unchanged, as expected.
