Notably EUR/USD is holding onto the gains made on yesterday's Washington Post report. We consider this a fair adjustment after EUR/USD overshot on the downside last week. And short-term fair value models – based largely on rate spreads – suggest EUR/USD could correct further to 1.05 if there was sufficient reason, ING’s FX analyst Chirs Turner notes.
The latest monthly Consumer Expectations Survey by the European Central Bank showed on Monday that Eurozone inflation is seen a tad higher for the year ahead in November.
The Euro (EUR) is extending gains in early trade, rising more than 1% on the day, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.
The European Central Bank (ECB) announced on Thursday that it lowered key rates by 25 basis points (bps) following the October policy meeting, as expected. With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility stood at 3.4%, 3.65% and 3.25%, respectively.
The European Central Bank (ECB) announced on Thursday that it lowered the interest rates on the marginal lending facility to 3.9% from 4.5% and the deposit facility, also known as the benchmark interest rate, by 25 basis points to 3.5%. The ECB also cut the interest rate on the main refinancing operations by 60 bps to 3.65%.
EUR/USD trades listlessly near 1.0400 in the European session on Thursday. The pair stays defensive as US President Trump has threatened to impose tariffs on the Eurozone. Further, ECB rate cut expectations also weigh on the major alongside fresh US Dollar demand ahead of US data.
GBP/USD has come under renewed selling pressure and battles 1.2300 in the European trading hours on Thursday. The pair meets supply as the US Dollar stabilizes and traders digest US President Trump's tariff talks, gearing up for the mid-tier US economic data later in the day.
Gold price (XAU/USD) remains depressed through the first half of the European session on Thursday and for now, seems to have snapped a three-day winning streak to its highest level since early November touched the previous day.
Ethereum price trades around $3,200 while Ripple and Solana hovers around $3.13 and $250, respectively, on Thursday. Santiment data shows that ETH market capitalization fell 4.7%, while XRP and SOL surged 36.9% and 32.2% in one month.
There has been a positive tone to risk this week, as the market digests Trump 2.0. However, Trump is not the only show in town. Earnings reports are also a key driver of stock indices, and the news is good.
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone. With its beginnings in Germany in 1998, the ECB’s mandate is to maintain price stability in the Eurozone, so that the Euro’s (EUR) purchasing power is not eroded by inflation. As an entity independent of individual European Union countries and institutions, the ECB targets a year-on-year increase in consumer prices of 2% over the medium term. Another of its tasks is controlling the money supply. This involves, for instance, setting interest rates throughout the Eurozone. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Christine Lagarde has been the President of the ECB since November 1, 2019. Her speeches, statements and comments are an important source of volatility, especially for the Euro and the currencies traded against the European currency.
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Christine Lagarde was born in 1956 in Paris, France. Lagarde, who graduated from Paris West University Nanterre La Défense, became President of the European Central Bank (ECB) on November 1, 2019. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund (IMF) between 2011 and 2019. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007-2011), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005-2007).
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Prior to the rate decision:
After the rate decision:
More generally, relatively high interest rates will usually result in a stronger Euro and vice versa.
The European Central Bank’s (ECB) decision on interest rates always has an effect on the Euro (EUR).
When interest rates increase, the European Central Bank is selling government securities to large financial firms. In turn, the financial organizations are paying in euros for these securities. This effectively decreases the amount of currency circulating in the economy. A decreasing supply leads to higher demand and therefore causes the value of the Euro to appreciate.
When the interest rates decrease, the European Central Bank floods the market with euros. This is done by purchasing government securities from financial organizations. In return for the securities, these banks and financial deals are paid in euros, therefore increasing the supply of euros in the economy. As supply increases, the value of the Euro depreciates.
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
In practical terms, QE means that central banks create money out of nothing to buy securities, such as government bonds. This new money swells the size of bank reserves by the quantity of assets purchased and that’s why this programme is called Quantitative Easings. The money supply is intended to flood financial institutions with capital in an effort to stimulate lending and increase liquidity.
Much of the governments’ debt is held by banks in the Eurozone and the ECB wants them to give more credits. If the European Central Bank buys government bonds, their prices rise and profitability drop even more. This is a liquidity-providing operation that weakens the value of the euro. This depreciation makes European exports cheaper and competitive, and ultimately, helps in recovering. In addition, as a result of the stimulus to internal and external consumption, the ECB combats the risk of deflation, a widespread and prolonged drop in prices, as well as the high unemployment.
The long term refinancing operation (LTRO) is a cheap loan scheme for European banks that was announced by the European Central Bank towards the end of 2011 in a bid to help ease the eurozone crisis.
Round one was carried out on 21 December, when banks took €489 billion from the European Central Bank. The loans are due to be repaid within three years at a rate of 1%, and a second round will be launched on 28 February, with the results of how much money was requested due on 29 February.
As the eurozone crisis has escalated, banks have become less stable and have less money to lend. The objective of the LTRO is to boost cash flow in the market and avoid a severe credit crunch or collapse of the banking system.
