The ECB president stuck to a mainly wait and see mode in his press conference reiterating the position that economic conditions have stabilized at low levels but showed concern about downside risks ahead.

From ECB Statement: Available survey indicators confirm some tentative signs of a stabilisation in economic activity at a low level around the turn of the year, but the economic outlook remains subject to high uncertainty and downside risks. The underlying pace of monetary expansion remains subdued.

width=400Draghi, in the Q&A, said that the Governing Council did not discuss a change in interest rates today.

Looking ahead, we expect the euro area economy to recover very gradually in the course of 2012. The very low short-term interest rates and all the measures taken to foster the proper functioning of the euro area financial sector are lending support to the euro area economy. Moreover, stress in financial markets has diminished in response to our monetary policy measures, but also in response to the progress made towards a stronger euro area governance framework and intensified fiscal consolidation in several euro area countries. However, subdued global demand growth, the remaining tensions in euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors, continue to dampen the underlying growth momentum.

The LTRO tender has helped to stabilize the European banking sector and the governing Council will wait for further evidence of its impact as well as the up-take of the second LTRO tender due at the end of February before considering further loosening policy. When asked Draghi responded he believes the consensus is for banks to ask for a similar amount as in December, and tried his best to deflect any stigma associated with accessing those funds.

Draghi also did not comment on on speculation that the ECB may be willing to help Greek PST (private sector involvement) by forgoing profits on its bonds or by selling bonds to EFSF at a loss. He did say that the ECB continues to reject financing of governments.

The key then really for the ECB was the announcement that the eligibility criteria that national central banks will accept for loans had been expanded yet again - as they will now accept credit claims.

From ECB: The Governing Council of the European Central Bank (ECB) has approved, for the seven national central banks (NCBs) that have put forward relevant proposals, specific national eligibility criteria and risk control measures for the temporary acceptance of additional credit claims as collateral in Eurosystem credit operations. Details of these specific national measures will be made available on the websites of the respective NCBs: Central Bank of Ireland, Banco de España, Banque de France, Banca d'Italia, Central Bank of Cyprus, Oesterreichische Nationalbank and Banco de Portugal.

Draghi also stated that the ECB will take more risk on collateral and that the ECB was concerned about slowing down in credit growth.

The annual growth rates of loans to non-financial corporations and loans to households, adjusted for loan sales and securitisation, also decreased further in December, and stood at 1.2% and 1.9% respectively. The volume of MFI loans to both sectors declined in December, and this was particularly pronounced in the case of the non-financial corporate sector. In addition, there are indications that bank lending conditions tightened further, affecting loan supply in several euro area countries in late 2011. It is not yet possible to draw firm conclusions from these developments, particularly given that the impact of the first three-year LTRO on bank funding is still unfolding and may not have been fully reflected in the most recent bank lending survey. In addition, other non-standard monetary policy measures announced in December are still to be implemented. Accordingly, close scrutiny of credit developments in the period ahead is essential.


Besides the change in eligibility criteria, without offering up much new policy here, the EUR/USD continued to revolve around rumors of imminent Greek acceptance of austerity measures which would open the door for the country to receive its second bailout package as well as move it one step forward towards finalizing a agreement on its debt restructuring.

The pair was testing its highs near 1.3315 at the time of writing this article.

For more on the EUR/USD see today's technical update: Mario Draghi Provided no Spark at the ECB Press Conference; EUR/USD Keeps Bullish Bias

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Nick Nasad is an analyst, educator, and trader; and one of the main contributors to FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.