Has Super Mario Brokered a Currency War Ceasefire?

It has been a brutal race to the bottom for currencies. And there have been very few winners as economies remain bruised and battered after interest rates were slashed, the lower bound tested through negative deposit rates and monetary policy re-written to explore more inventive options.

But in the latest chapter, as Europe’s central bank gets more abstract, action has swung to credit easing rather than the hefty burden born by rate cuts This maybe, just maybe, could signal the end of the road for not only negative rates but currency wars.

The European Central Bank President Mario Draghi served up what is thought to be the final rate cut in Europe for this economic cycle, taking the deposit rate to -0.40 percent. At the same time, he slammed the door shut on an even deeper foray into negative rates. The euro’s haywire 4 euro cents move in one session last Thursday reflected changing market perceptions about interest rate differentials and fair value for the euro.


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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.