The ECB has not changed its policy or its guidance. The ECB is prepared to do more if needed and the risks to growth remain on the downside. The overall assessment is the same as before. Inflation is subdued, as are monetary aggregates and credit. He noted that Q2 growth was partly a recovery from the weather-induced weakness in Q1, but that Q3 has begun softer. Balance sheet adjustments continue to weigh on activity.
Draghi also presses governments to do their part and reduce deficits and debt levels and to enact structural reforms. When specifically asked about the euro, Draghi noted that the central bank does not target the exchange rate, but is attentive to developments. He did not show concern about the euro's appreciation in recent months. This gave short-term players another excuse to push the euro higher.
The euro had dipped in Asia, to slip through yesterday's low. Off this test on the $1.3500, the euro has moved higher and has moved above yesterday's high. We think the euro has potential toward $1.37. By embracing "a vast array" of instruments, Draghi does leave the door open to another LTRO. There will be more details about the Asset Quality Review to be conducted as a preliminary step toward the single supervisory and resolution mechanism in the second half of this month.