ECB Cut its Rate to 0.25% – the Euro/USD is Plunging

Despite the low expectations for any change in policy, the ECB has surprised the markets as it has cut down the interest rate by 0.25 percentage point to 0.25% – its lowest level in history. From the other side of the Ocean the US GDP report for Q3 came out and showed a 2.8% growth rate – higher than anticipated. These two news items have dragged down the prices of gold and silver that fell by over 1.1%. The Euro/USD has promptly reacted and tumbled down by over 1.2%.

Regarding the interest rate decision, the early expectations were that ECB will keep the rate, which was set at 0.5%, unchanged. Nonetheless, analysts also expected ECB President Draghi to refer to ECB’s economic outlook. This news has promptly resulted in the sharp fall of the Euro/USD to 1.33.  This could also further drag the Euro below the 1.3 mark in the near future.

This wasn’t the only headline for today: the U.S GDP first estimate for the third quarter came out. According to the recent update, the real GDP grew by 2.8%. This growth rate is higher than the rate many had expected. In comparison, in the previous quarter, the GDP expanded by 2.5%.  This higher growth rate is a good sign for the progress of the U.S economy in the previous quarter. 

This news has also contributed to the rally of the US dollar and drop of gold and silver prices.

For further reading: