ECB Rate Cut Lower than Expected

The ECB has always found a way to perplex analysts. After various calls from European leaders to be more proactive and help boost the economic recovery the Central Bank has cut the base rate in 25 basis points.

The European rate now stands at 1.25%. The market was expecting at least a 50 basis points cut given the deepening recession. As more and more Central Banks get near the point where the interest rate as a monetary tool is limited and have to engage in quantitative easing.

It remains to be seen if the G20 summit in London will have an effect on ECB policy going forward. The Euro has traded down after the announcement and will continue to look for direction from G20 comments.

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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