In the central economic event this week, the Governing Council of the European Central Bank quite surprisingly decided to refrain from making any major changes to its monetary policy at the present rate.
The most logical decision that the Council agreed upon at its meeting today, was to maintain the Main Refinancing Rate unchanged at 0.00 per cent, as per the consensus market forecasts.
In a somewhat surprising move, however, the Council decided to postpone any recalibrations of its underlying monetary policy just now, despite the deepening coronavirus crisis, disappointing industry numbers, and freefalling stock market.
In the post-decision monetary policy statement, it was observed that:
"The new round of Eurosystem staff macroeconomic projections in December will allow a thorough reassessment of the economic outlook and the balance of risks. On the basis of this updated assessment, the Governing Council will recalibrate its instruments, as appropriate, to respond to the unfolding situation and to ensure that financing conditions remain favourable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path."
While the decision to make long-term interventions based on comprehensive data is admirable and indeed desirable, the ECB is running a risk of making such pivotal recalibrations too late.
By the time the full set of data is available to the Council in December, the fallout from the coronavirus crisis could have overburdened the already strained financial system in the Eurozone.
At any rate, the ultimate decision of the Council to leave the scale and timing of its various asset purchasing programs virtually unchanged in October is going to have direct implications for the value of the euro in the next two months.
Consequently, the euro is likely to continue depreciating against the greenback, as the broader downtrend continues with its establishment. The woes for the single currency are also prevalent in other majors.
As can be seen on the hourly chart below, the EURGBP is currently in the process of establishing a major Bearish Triangle pattern. Should the price action rebound from the descending trend line for a fifth time, it could attempt to break down below the major support level at 0.90150 next.