EUR Drops Threatens 1.30 Support After ECB Rate Cut

European stock markets surged and the euro sank on Thursday after the European Central Bank surprised by cutting already ultra-low interest rates to prop up a struggling economy.

Faced with signs of further deterioration in the euro zone’s prospects, the central bank cut all of its interest rates by another 10 basis points to new record lows, putting its deposit rate further into negative territory.

European stock values jumped around half a percent in response .FTEU3, while the euro sank as much as a cent on the day. EUR=

 
“It’s a surprise. Euro/dollar is getting slammed. The DAX should go up from here,” said Darren Courtney-Cook, head of trading at Central Markets Investment Management.

Sources familiar with the ECB’s discussions told Reuters that officials had also been looking at plans to launch an asset-backed securities (ABS) and covered bond purchase programme worth up to 500 billion euros. The first such purchases, if approved, could be made this year.

Nothing on the asset purchase programme was announced with the bank’s regular policy statement on interest rates at 1145 GMT (0745 EDT). President Mario Draghi gives his regular and more detailed update on the bank’s outlook starting at 1230 GMT.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza