"The ECB will do everything necessary within its mandate to preserve the euro," the head of the european central bank (ECB) said thursday during a speech in london. "And believe me – it will be enough."The financial markets reacted euphorically to the revisions. The euro exchange rate shot up by more than 1.5 cents and surpassed the mark of 1.23 U.S. Dollars.
Even more important than the demonstrative determination, traders said draghi’s statements could point to a resumption of the ECB’s bond-buying program, which has been on hold since march. The head of the central bank said that if the transmission mechanism for the effect of monetary policy is disrupted by the high level of interest rates, this would fall within the scope of the central bank’s tasks. The ECB had already used similar formulations to justify interventions in the bond market in the past.
"The central bank has now been allowed to follow up draghi’s hints with action," said thomas amend, an expert at the bank HSBC trinkaus. Draghi’s statements also helped the german leading index dax to gain on thursday afternoon. The german benchmark index was last quoted 1.45 percent higher at just under 6500 points.
However, the strongest beneficiaries were the tense bond markets of the crisis states spain and italy, i.E. The crisis hotspot targeted by the ECB’s presumed interventions: in the longer and trend-setting ten-year maturity range, the yield for spanish government bonds fell below the critical seven percent mark for the first time in a week. For short-dated securities of two years, the yields in spain as well as in italy fell even more sharply by more than half a percentage point.