We witnessed highly volatile trade on the Forex market during the last day, caused mainly by the ECB interest rate decision
The central institution decided on lowering the key interest rate by 25 basis points to 1% and also lowered the bank required reserve ratio from 2% to 1%, which was in accordance with the expectations of market participants. Furthermore, the bank introduced some unconventional measures, among which long term financing operations for a period of 3 years.
The surprises came at the press conference, where president Mario Draghi disappointed investors, saying that the bank will not participate in purchasing EU countries’ bonds since this is in contradiction with the EU treaty. Draghi also denied speculations that the ECB is going to lend to the IMF which will give credits to the Eurozone on his side. As a result the credit spread between German Bunds and the peripheral countries widened and the currencies correlating with risk appetite were sold off.
The EUR/USD pair lowered from 1.3411 to 1.3341, reaching daily low at 1.3289. The British pound also depreciated against the US currency from 1.5707 to 1.5627.
The risk off situation was most clearly visible in the depreciation of the commodity currencies. The Australian dollar plunged from 1.0291 to 1.0165 and the Canadian dollar went down from 1.0095 to 1.0227 against the “greenback”.
The gold also registered a decrease with $34 to 1707 $/ troy ounce.
The central institution decided on lowering the key interest rate by 25 basis points to 1% and also lowered the bank required reserve ratio from 2% to 1%, which was in accordance with the expectations of market participants. Furthermore, the bank introduced some unconventional measures, among which long term financing operations for a period of 3 years.
The surprises came at the press conference, where president Mario Draghi disappointed investors, saying that the bank will not participate in purchasing EU countries’ bonds since this is in contradiction with the EU treaty. Draghi also denied speculations that the ECB is going to lend to the IMF which will give credits to the Eurozone on his side. As a result the credit spread between German Bunds and the peripheral countries widened and the currencies correlating with risk appetite were sold off.
The EUR/USD pair lowered from 1.3411 to 1.3341, reaching daily low at 1.3289. The British pound also depreciated against the US currency from 1.5707 to 1.5627.
The risk off situation was most clearly visible in the depreciation of the commodity currencies. The Australian dollar plunged from 1.0291 to 1.0165 and the Canadian dollar went down from 1.0095 to 1.0227 against the “greenback”.
The gold also registered a decrease with $34 to 1707 $/ troy ounce.