Jakob Christensen, chief analyst at Danske Bank, notes that EUR actually proved rather resilient to ECB hints of a tiered deposit system yesterday notwithstanding the significant drop seen in euro rates across the curve.

“On the one hand, to the extent that tiered deposits allow ECB to keep rates lower for longer it is clearly a EUR negative. On the other hand, to the extent that this leaves the impression of an ECB that is severely challenged on its toolbox and that low inflation risks becoming entrenched (like has happened for SNB and BoJ) it is a EUR positive down the road. ECB will have to stick to a soft stance near term, and this may fuel a larger easing risk premium on EUR/USD, but we are not in for a break of 1.10 in our view.”