The ECB meeting had little chance of sending the Euro lower: if you recall that November meeting, Lagarde warned investors that they should expect a major policy adjustment in December. However, since then various ECB officials have been steering market expectations towards much less easing. Which, in fact, happened on Thursday - the bank just raised the limit of the pandemic asset purchase program by 500 billion euros (which in no way obliges the bank to ramp up asset purchases) and increased long-term cheap financing to banks (the so-called TLTRO program). The ECB did not increase the monthly QE purchases which of course was a major disappointment. We discussed such an outcome in our previous analyses and its likely impact on the euro (mainly bullish).

The second important point, which at the same time surprised and upset, is that EURUSD is already above 1.20, and the ECB did not even blink an eye. There was something like the usual phrase "closely monitoring Euro exchange rate", which is, of course, not enough to contain the Euro rise. Furthermore, the statement equals acknowledging that the exchange rate is fair and there is nothing super-speculative in it that needs to be suppressed.

EURUSD uptick in response to the ECB meeting is completely justified and indicated that the ECB was definitely underdelivered in easing expectations. Of course, it is bullish sign for the common currency:

Friday pullback is, in my opinion, a decent opportunity to consider medium-term long positions on the pair. Corrective pressure was caused by a decline in US futures and weakness in European markets (not the euro). As soon as this correction runs out of steam, we will probably see 1.22+ on the pair.

Considering other European currencies, such as SEK and NOK, which are also sensitive to the ECB's policies. The outcome of yesterday's meeting will probably also add weight to these currencies and, purchases against major outsiders in major currencies such as USD are highly justified.

Regarding the stimulus in the US, there was yet another disappointment - the final decision on fiscal aid may not be made until Christmas. Speaker of the House of Representatives Pelosi hinted at this. The main catalyst of growth has been taken away from the stock markets and it’s clear that there is little to stop the decline except more clues about the fiscal deal.

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