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How Did the Euro React to ECB Policy and Draghi Press Conference?

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Euro fell after interest rate decision

The euro-to-US-dollar currency pair, which is directly related to the common currency, had a volatile day as it traded in a wide range of 1.0823–1.1209 until 2:00 PM ET on March 10, 2016. The euro was trading close to the 1.098 level before the European Central Bank’s (or ECB) rate cut announcement.

The euro sharply reacted to the ECB’s decision to cut the minimum bid rate and to increase the asset purchase program. The euro fell to a low of 1.0823 ahead of ECB chief Mario Draghi’s press conference. This was a fall of nearly 1.4% from the pre-interest rate cut announcement level.

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Euro rebounds after Draghi press conference

The euro-to-US-dollar currency pair staged a stronger comeback after the Draghi press conference, which was scheduled 45 minutes after the ECB interest rate announcement. Draghi’s dovish comments regarding future interest rate cuts were immediately discounted by the market as the euro rose from the low of 1.0823 to a high of 1.1217 at 2:00 PM ET. This was a rise of nearly 3.6% from the day’s low and a rise of nearly 2% from the day’s opening level.

Impact on the market

In terms of the performance of currency-based ETFs linked to the euro, the ProShares UltraShort Euro ETF (EUO) fell by 3.46%. EUO is inversely linked to the euro. In contrast, the Guggenheim CurrencyShares Euro Trust ETF (FXE) has a direct relationship to the euro. FXE rose by 1.82% at 2:00 PM ET on March 10, 2016.

The German ADRs (American depositary receipts) trading on the US exchanges had a mixed day after the ECB release. SAP (SAP) fell by 0.76%, Deutsche Bank (DB) rose by 0.68% as Draghi press conference gave a boost to the banking sector, and Belgian beverage maker Anheuser-Busch InBev (BUD) was trading nearly flat until it rose slightly by 0.16% at 2:00 PM ET.

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