This morning’s ECB rate decision was without significant fanfare. This comes despite the excitement that was seemingly building throughout much of the year as market participants prepared to finally hear how the European Central Bank might move away from their gargantuan stimulus program. As growth and inflation have begun to show with more stability throughout the bloc, we even saw rate expectations starting to price in hikes for 2018. To be sure, these weren’t exactly ebullient expectations; but the simple fact that rate hikes were entering the conversation was emblematic of the shift that had started to show within the European economy.

At this morning’s ECB rate decision, the bank was unprepared to leave stimulus behind, or to even plan for such a scenario. The ECB announced that they were going to extend the bond-buying program beyond its prior end date of December, 2017. The extension will run from January of 2018 to September, and the amount of monthly bond buys will be halved to €30 Billion per month from the current €60 Billion. But perhaps more surprising to markets was the ECB’s statement on rates, as the bank left all three key rates unchanged. The ECB also said that rates will remain at present levels for an extended period of time.

This is yet another dovish outlay from the bank, as much of the year has seen divergence between market expectations, spot rates and the stance of the ECB. The bigger question is whether this dampening of expectations around potential rate hikes might allow for a deeper retracement in the Euro. As the Fed lays the groundwork to hike in December while saying that they’re looking at three more in 2018, this can expose the bullish trend in EUR/USD that’s built on the basis of shifting rate expectations, with markets attempting to pre-empt or get in-front of any potential tightening from the ECB.

The initial response after the ECB released their statement was a move-lower in the Euro. EUR/USD moved down to an area of support that’s held the lows in the pair over the past week and a half. This is the 23.6% retracement of the recent pullback in the pair and, at least so far, we’re seeing buyers step-in to hold the lows.