7 Nov 2013
EUR/USd Euro remains under pressure following ECB rate cut
FXstreet.com (London) - The euro remains under pressure after the European Central Bank went wrong-footed recent expectations and cut its main refinancing rate to a record-low 0.25 percent. The move came as part of an effort to stymie deflationary pressure within the Eurozone.
EUR/USD bounced off resistance at USD1.3300 after its biggest fall in two years. It rebounded to USD1.3377, undoing a fraction of the rapid losses, but has once again come under selling pressure. The pair is now trading at USD1.3364, down 1.1 percent on the day.
The ECB stepped in to try and ease European credit conditions after weak macro data indicated a stalling of and recovery within the area. Last week inflation numbers for September missed expectations, printing at 0.7 percent year-on-year, undershooting expectations of a 1.1 percent rise in prices. Eurostat also upward revised previous unemployment statistics from 12.0 to 12.2, undoing any optimism that the European labour market was strengthening.
While the ECB does not have the option at its disposal of aggressive quantitative easing programmes as have been pursued by the Fed and the Bank of England, it does have the LTRO option which it may now exercise.
On cutting the refi rate, ECB president Mario Draghi said that the central bank was not targeting exchange rates. But while a 25bps drop will do little to directly ease deflationary pressures, the statement echoes many of Bank of Japan president Haruhiko Kuroda’s words as the BoJ steps up asset purchases that knock unwanted strength out of the yen.
EUR/USD bounced off resistance at USD1.3300 after its biggest fall in two years. It rebounded to USD1.3377, undoing a fraction of the rapid losses, but has once again come under selling pressure. The pair is now trading at USD1.3364, down 1.1 percent on the day.
The ECB stepped in to try and ease European credit conditions after weak macro data indicated a stalling of and recovery within the area. Last week inflation numbers for September missed expectations, printing at 0.7 percent year-on-year, undershooting expectations of a 1.1 percent rise in prices. Eurostat also upward revised previous unemployment statistics from 12.0 to 12.2, undoing any optimism that the European labour market was strengthening.
While the ECB does not have the option at its disposal of aggressive quantitative easing programmes as have been pursued by the Fed and the Bank of England, it does have the LTRO option which it may now exercise.
On cutting the refi rate, ECB president Mario Draghi said that the central bank was not targeting exchange rates. But while a 25bps drop will do little to directly ease deflationary pressures, the statement echoes many of Bank of Japan president Haruhiko Kuroda’s words as the BoJ steps up asset purchases that knock unwanted strength out of the yen.