Mario Draghi’s speech overwhelmed the markets

The euro erased its initial losses after European Central Bank (ECB) President Mario Draghi hinted that it is not expected a further reduction of key interest rates in the eurozone.

Surprisingly the massive new stimulus measures taken by the European Central Bank at today's meeting led for a short time to a drop in the euro to 5-week lows at 1.0822 dollars and 0.7652 pounds. The single currency managed to hit a weekly low at 1.0891 swiss franks and dropped to hourly day low at 123.65 Japanese yen.

But the following  comments by ECB governor Mario Draghi that he does not expect a further reduction in key interest rates led to a sharp rebound of the single currency to a two-week high of 1.1115 dollars. Meanwhile, the euro rose to a one week high of 0.7797 pounds to three-week high of 126.24 Japanese yen.

The initial euphoria of the European stock markets caused by today's decision of the ECB to undertake a series of aggressive stimulus measures is fading away. It looks like investors began to realize that today's fall in deposit interest rates of ECB to -0.4% is a "double-edged sword," especially with regard to commercial banks and their profits that form the largest part of the ongoing credit policies.

After an initial rise in the main European stock indices by between 2.5% and 3.0% at the end of trading today they wiped out a large part of their profits. Now the common European Stoxx Europe 600 index rose by a modest 0.83 percent, Germany's DAX rose 1.37%, while the French index CAC40 - by 1.49%. Passing the initial euphoria is due largely to the sharp appreciation of the euro, which is potentially negative for export-oriented companies in the eurozone.