No Interest Cuts for ECB This month – the Euro/USD is Rising

ECB President Mario Draghi left the ECB cash rate flat at 0.75% and the deposit rates at 0%. In the press conference that followed the announcement Mario Draghi kept this usual stands about the projections of Euro Area. He stated that the EU will shows signs of recovery as the year will progress. This slowly recovery will occur as the global will economy will grow, which will also positively affect the EU economy.

ECB also updates its outlook regarding the EU economy: it lowered its expected inflation for 2014 from 1.4% to 1.3%. The EU GDP will contract during 2013 by 0.5% and not by 0.3% as it was predicted three months earlier.

The news of this decision made by ECB may have been among the reasons for the sharp rise in the Euro/USD, which, in the process, also pulled up commodities prices.

This reaction may have been due to the expectations of the markets for a rate cut that didn’t occur.

In the previous month’s rate decision press conference, ECB President pointed out to the positive economic developments of the Euro Area.

Despite the usual reassuring words of ECB President the currencies war of other central banks are keeping the EU from falling. The decline in the inflation rate of the EU along with the economic activity is likely to raise the odds of ECB will eventually need to lower its current interest rate. Once this occurrence will happen, the Euro is likely to pull down, which will also drag other risk related currencies and commodities prices.

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