The ECB President Mario Draghi decided to keep the ECB policy unchanged as the cash rate remained unchanged at 0.50%. This decision came after many suspected the ECB might decide to lower its cash rate again or perhaps even introduce a negative deposit rate.
I think ECB is still waiting for the market reaction to last month’s rate cut, including the effect it may have on the inflation and the loans banks offer to clients. If these factors will continue to dwindle or even remain unchanged, ECB might decide to lower its cash rate again in the coming months. Until then, the latest rate decision is likely to keep the Euro recovering against the USD.
Bank of England also left its monetary policy unchanged. This news along with ECB’s “non decision” may have contributed to the rally of the British Pound against the USD. Other currencies also sharply rallied yesterday against the USD including the Japanese yen.
In the U.S jobless claims declined during last week by 11k to reach 346k. This news didn’t curb the drop of the USD against leading currencies but this news may have helped pull up the U.S equities markets during yesterday.
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