The Euro weakened against the US Dollar and Sterling after European Central Bank policy-maker Ignazio Visco told a news website that the Eurozone’s Central Bank could cut its deposit rate into negative territory.
Such a move would mean that the ECB would charge commercial banks for holding their money overnight, something that the Banks President Mario Draghi said the bank was ‘technically ready’ to do. If the ECB does make such a move it would encourage banks to lend out more money to the real economy rather than keep it held at the ECB.
It is hoped that more money would be loaned out to businesses and people, which would in turn increase growth. Negative rates would however have a large impact on bank operations and would have major implications for the bond markets and funding.
Visco said, “We all agreed in the council that we have to look with care and in that case we may reduce the deposit rate, we think that- and I personally think that, this is effective- the economy is now capable o taking it on board. Technically we are equipped and ready to intervene. There may be unintended consequences- we know we may have to work on that-and we know how to work on that.”
Economists will be looking to the ECB for any sign that it is prepared to take action to promote growth. This week’s round of Eurozone data releases is expected to reveal the economic damage caused by the Eurozone crisis. GDP data due on Wednesday is expected to show that the Eurozone region declined by 0.1% in the first quarter of 2013, a sixth consecutive decline.
Current Euro (EUR) Exchange Rates
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The Euro/US Dollar Exchange Rate is currently in the region of: 1.2975<
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8445
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7713>
The Pound Sterling /Euro Exchange Rate is currently in the region of: 1.1846 >
The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.7698<
The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6401 <
(Correct as of 11:35 am GMT)
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