Euro Witnesses Sharp Decline after ECB Extends Bond-buying Program

The euro swung from gains to losses on Thursday following the European Central Bank’s monetary policy statement that showed the central bank would extend but at the same time taper its monthly bond-buying program in April.

Considering uncertainties from both inside and outside the 28-nation bloc namely Brexit, the U.S. election and the Italian referendum, the ECB decided to expand its quantitative-easing program to exceed 2.2 trillion euros ($2.4 trillion) by the end of 2017. However, the monthly pace will be reduced to 60 billion euros ($65 billion) a month from 80 billion euros currently.

According to the statement, the Governing Council may “increase the program in terms of size and/or duration” if the outlook becomes less favorable or if financial conditions become inconsistent with further progress toward a sustained adjustment of the path of inflation”.

Following ECB’s monetary policy, the U.S. Federal Reserve will hold its own meeting which is widely expected to witness the second rate hike in 10 years. The divergence in policy between two central bank is likely to send the pair EURUSD lower.

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