Unsurprisingly the European central bank has held its rates steady yesterday at 0% for 17th consecutive month. The ECB meeting took place against a backdrop of strengthening of the single currency. The EURUSD pair has reached 1.16 for the first time in two years.
ECB President Mario Draghi appeared dovish, certainly in an effort to calm down financial markets and the euro appreciation. Markets did not buy it and they still believe that further tightening are on the roadmap and this sentiment is largely boosting the Eurodollar.
While he mentioned in June that the ECB monetary policy would follow the Eurozone recovery, which had already been interpreted as hawkish by markets at the time, he appeared yesterday concerned about the Eurozone inflation path. He mentioned that the current QE could be increased. In other words, a larger volume of bonds could be purchased and with larger duration.