Back
4 Sep 2014
EUR/USD worst day since November 2011
FXStreet (Córdoba) - The decision of the ECB to cut rates to new record lows weakened the euro across the board. The EUR/USD was trading at 1.3125 before the ECB and then plummeted. During Wall Street trading bottomed at 1.2918 and then bounced to the upside. The recovery from the lows found resistance around 1.2955 and pulled back below 1.2950.
Currently trades at 1.2940, 209 pips below where it closed yesterday or 1.60% lower. The last time EUR/USD fell by more than 200 pips was on November 9, 2011 when it plummeted from 1.3837 to 1.3541 as Italian yields surged to a record high. Today EUR/USD is lower and Italian yields are at record lows.
EUR/USD outlook negative after ECB
The actions taken by the ECB affected the common currency and also its outlook. “As interest rates are already close to zero, a cut of the refi rate alone would probably have had a much more muted impact on market rates. Therefore, the decision to cut also by 10bp the interest rate on deposit facility is welcome”, said Clemente De Lucia, Economist at BNP Paribas.
According to De Lucia a sharper reduction of markets rates “would put greater downward pressures on the exchange rate, which will ease monetary and financial conditions and boost exports”. He warned that if conditions turn for the worse, the ECB will be forced to buy sovereign debt securities.
Currently trades at 1.2940, 209 pips below where it closed yesterday or 1.60% lower. The last time EUR/USD fell by more than 200 pips was on November 9, 2011 when it plummeted from 1.3837 to 1.3541 as Italian yields surged to a record high. Today EUR/USD is lower and Italian yields are at record lows.
EUR/USD outlook negative after ECB
The actions taken by the ECB affected the common currency and also its outlook. “As interest rates are already close to zero, a cut of the refi rate alone would probably have had a much more muted impact on market rates. Therefore, the decision to cut also by 10bp the interest rate on deposit facility is welcome”, said Clemente De Lucia, Economist at BNP Paribas.
According to De Lucia a sharper reduction of markets rates “would put greater downward pressures on the exchange rate, which will ease monetary and financial conditions and boost exports”. He warned that if conditions turn for the worse, the ECB will be forced to buy sovereign debt securities.