The euro tumbled to the lowest since September 2003, touching $1.0986, after Thursday’s European Central Bank meeting and press conference. ECB President Mario Draghi made a statement and answered questions at a press conference following the policy meeting. He sounded optimistic about the Euro zone early in his speech, as he spoke of upward revisions on the growth outlook for the euro area. However as he began to discuss details of the Bank’s quantitative easing program, the markets were concerned that the supply of bonds will not be enough for this program.
On Thursday, the ECB held its key interest rates unchanged as expected and confirmed it would
purchase 60 billion euros of bonds (including public and private sector securities) until the end of
The ECB staff projections were noticeably more optimistic. According to projections, annual real GDP was seen to increase by 1.5% in 2015, 1.9% in 2016 and 2.1% in 2017. The ECB also announced it increased the ELA (emergency liquidity assistance) floor for Greece by 500 million euros.
The ECB said it would buy bonds up to the ECB deposit rate of minus 0.20%. There is concern that the supply of bonds would be limited and the Bank would face a problem where the supply of bonds is too low which means it would have trouble meeting its QE target of 60 billion euros a month.
As a result of this concern, the markets sold off the euro, pushing down to a fresh eleven-year low, below the key $1.10 level, the lowest since September 2003.