Euro soars on further ECB interest rate cut

11 March, AtoZForex, Lagos – Even without too many economic reports on the calendar for yesterday, the currency markets experienced ample volatility, majorly driven by the European Central Bank’s (ECB) decision to cut rates further into negative territory. The ECB decided to cut its benchmark interest rate from 0.05% to 0%. Bank deposit rate got decreased to -0.40%, a 10 basis points decline, while marginal lending facility rate was also reduced to 0.25% drop, a 5 basis points drop. The quantitative easing (QE) program expanded by €20bn to €80bn a month, commencing in April.

In the ensuing ECB press conference, central bank Governor Mario Draghi confirmed the downward revision of the outlook for economic growth for the bloc nation, which is seen to mainly reflect the weakened outlook for the global economy, therefore prompting the ECB interest rate cut. Although, he clarified that this may be the last rate cut, as he did not anticipate a need for further cut. After a steep fall on the release of the rate decision, the euro rebounded upwards sharply on Draghi’s comments off the session lows. The new forecast points to an average growth of 1,4 percent for euro zone’s 19 countries in 2016, rather than the 1.7 percent forecast in December.

Unemployment claims at 5 month low

Also strengthening the jobs condition of the US, the unemployment claims showed US labor market is strengthening, as the number of US citizens filing for jobless claims fell sharply compared to the forecasts, hitting a 5 month low. This follows the positive NFP data posted last week. The strong US labor market might further diminish the fears of a recession. Now, with an improving labor market and a consolidating inflation, the Fed could gradually raise interest rates again this year. After, the historic rate hike of the Fed last year in December, marking the first rate hikes in nearly a decade.

Canada Unemployment rate (1:30 P.M GMT)

Canada’s employment change and unemployment rate will be released as well, forecast to come at 10.2k and 7.2% respectively. Having found some renewed strength against the USD, the Canadian dollar remains in a strong bullish trend against the USD. The country’s recent economic conditions have also rebounded as oil prices rebounded.

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