The Governing Council of the European Central Bank just released the monetary policy statement from its December meeting. Quite unsurprisingly, the ECB decided to scale up drastically its pandemic and non-pandemic purchases in a bid to foster faster recovery.
The markets have been bracing for such a turn of events for over a month now, following the Council's uneventful meeting in late-October. ECB's decision to broaden the scope of its underlying QE programs was seen as a necessary step given the recent downbeat data in the Euro Area.
"[…] the Governing Council decided to increase the envelope of the pandemic emergency purchase programme (PEPP) by €500 billion to a total of €1,850 billion. It also extended the horizon for net purchases under the PEPP to at least the end of March 2022. "
The initial impact of the decision on the market was unimposing partly due to the fact that there was no general surprise in ECB's move. The more accommodative monetary policy stance is likely to cushion the impact of the coronavirus fallout.
Meanwhile, the EURUSD did not generate any massive price fluctuations in the wake of the decision's release. As can be seen on the 4H chart below, the pair continues to be depreciating marginally, while being contained within the borders of a downwards-sloping channel.
Despite the sudden upsurge in the underlying buying volume immediately following the release of ECB's statement, the price was not able to break out above the (flag) channel's upper boundary. Moreover, the price action continues to be concentrated below the 100-day MA (in blue).
All of this elucidates the strong bearish sentiment in the market as per our forecasts, despite the marginally rising bullish momentum.