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ECB and impact on EUR/USD

The European Central Bank has left interest rates on major refinancing operations, marginal lending arrangements, and deposit arrangements unchanged at 0.00%, 0.25%, and -0.50%, as expected.
The ECB further reported that it would continue to make net asset purchases under the Pandemic Emergency Purchase Purchase Program (PEPP) with total assets of a minimum of € 1.850 billion until the end of March 2022.

Key takeovers from the policy statement as summarized by Reuters.

The European Central Bank expects interest rates to remain at current or lower levels until it sees that the inflation outlook is strongly approaching a level close enough, but below, 2% within the projection horizon. The ECB expects that based on a joint assessment of financing conditions and looks at inflation, continue to make purchases under the PEPP over the next quarter and continue to do so at a much faster pace than at the beginning of the year.

EUR/USD, ECB

The ECB has committed itself to buy flexibly in line with market conditions and prevent tightening financing conditions that are not in line with countering the downward impact of the pandemic on the projected inflation path. The package should not be used fully if favorable financing conditions can be maintained with asset purchase flows that do not exhaust the package over the net PEPP purchase horizon.

Likewise, the envelope can be recalibrated if necessary to maintain favorable financing conditions to help prevent a negative pandemic shock on the inflation path.

The European Central Bank will continue to reinvest principal payments on matured securities purchased under the PEPP until the end of 2023. Net purchases will continue every month of € 20 billion.

The ECB continues to expect that monthly purchases of net assets under the application will take as long as necessary to strengthen the adaptive impact of its interest rates and will be completed shortly before it begins to raise interest rates.

The ECB is ready to adjust all its instruments, as necessary, to ensure that inflation is maintained in line with its target sustainably, in line with its commitment to harmony.

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