The European Central Bank has cut interest rates to a new record low of 0.5% in an attempt to boost growth in the recession hit Eurozone.
The widely expected cut is the first interest rate cut to be carried out by the bank in 10 months. Policy makers chose to cut the rate from 0.75% to a new record low of 0.50%. As a result the Euro strengthened against the US Dollar and Sterling.
Despite meeting economist expectations the Euro could quickly reverse its gains as now the ECB has exhausted its conventional policy tools a situation that raises the possibility of the introduction of negative deposit rates or other new non-standard measures.
“Markets were already anticipating this move but the fact that we’ve got it has led to some relief,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce. “We’ve got the cut in the marginal lending rate, which was a little more aggressive than perhaps you would have assumed. If Mr. Draghi helps us with some non-standard impetus maybe we can see a rally up to $1.33.”
Fresh data from the euro zone had supported the need for a cut, as manufacturing PMI numbers showed that France, Italy and Spain all saw continued falls in production last month.
“There is nothing here to suggest that manufacturing will turn the corner and stabilize any time soon, putting greater onus on policymakers to act quickly to reinvigorate growth,” said Chris Williamson, chief economist at survey collator Markit.
Because of the rate decision the Euro has shrugged off the impact of the plethora of negative data has seen it weighed down for most of the week. The currency had dropped by 1.3% over the past three months.
Current Euro (EUR) Exchange Rates
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3169
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8462
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.2879
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.5557
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7593
The Pound Sterling /Euro Exchange Rate is currently in the region of: 1.1817
The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.7764
The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6428
(Correct as of 14:15 pm GMT)
Comments are closed.