The European Central Bank provided a big surprise to the Forex market today, cutting interest rates to new lows, sending some of them deeper into a negative territory. What was not surprising was the reaction of the euro to the news — the currency sank, falling to the lowest rate in more than a year against the US dollar.
The ECB announced today that it cut the benchmark interest rate on the main refinancing operations by 10 basis points to the all-time low of 0.05 percent. The bank also announced that the interest rate on the marginal lending facility decreased by 10 basis points to 0.30 percent, while the interest rate on the deposit facility will be cut by 10 basis points to -0.20 percent. The central bank also announced a quantitative easing program in a form of purchasing of asset-backed securities.
While it was not a consensus, most analysts believed that the ECB will not act today. All in all, the news was very negative to the euro, leading to massive losses for the currency.
EUR/USD sank from 1.3150 to 1.3021 as of 13:43 GMT today, touching the low of 1.2995 — the weakest rate since July 15. EUR/JPY tumbled from 137.79 to 136.65, while EUR/GBP slid from 0.7988 to 0.7923.
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