The euro plunged more than 2% to drop to its lowest level since early September Investing.com — plunged more than 2% on Thursday, suffering its worst one-day fall since January, after European Central Bank president Mario Draghi offered strong hints that the bank is ready to lower interest rates and extend the scope of its comprehensive quantitative easing program.
The currency pair traded in a broad range between 1.1100 and 1.1351, before settling at 1.1106, down 2.05% on the session. With the dramatic sell-off, the euro dropped to its lowest level against the dollar since early-September. Heading into Thursday’s announcement, currency traders were hesitant to complete any major transactions in anticipation of market-moving comments from Draghi. Previously, the pair failed to close more than 1% in a positive or negative direction in a single session dating back to Sept. 21.
EUR/USD likely gained support at 1.0924, the low from Aug. 10 and was met with resistance at 1.1496, the high from Oct. 15.
Speaking at a press conference following the completion of the ECB Governing Council’s two-day meeting in Malta, Draghi signaled that the ECB is prepared to cut interest rates in the euro zone from their current record-low of 0.5%. Draghi also implied that the ECB will likely ramp up its EUR 60 billion a month bond buying program, as early as its next policy meeting in Frankfurt on Dec. 3. The stimulus measures may help the ECB ward off risks of a prolonged economic slump in the euro zone, as weak economic growth among emerging market nations spills over into the global economy at large.
The ECB launched the EUR 1.1 trillion easing program in March in an effort to stimulate the euro zone’s flagging economy. Large-scale bond buying programs are intended to push interest rates down, as the price of government bonds move higher. Quantitative easing programs are also intended to depress currency values, as it becomes more appealing for domestic investors to invest in the region due to the lower rates.
EUR/USD, for instance, slumped to near 10-year lows ahead of the launch of the program in March, before rallying when the Federal Reserve delayed lift-off on their plan to raise short-term interest rates. On Thursday, Draghi’s comments pushed the pair below 1.12 to its lowest level in three weeks.
“The governing council is willing and able to act by using all the instruments available within its mandate, if warranted, in order to maintain an appropriate degree of monetary accommodation,” Draghi said at the press conference.
Investors also await next week’s Federal Open Market Committee October monetary policy meeting for further clues on whether the U.S. central bank could lift short-term interest rates before the end of the year. Though the FOMC is not expected to raise its benchmark Federal Funds Rate this month, it could vote to begin policy normalization at the following meeting on Dec. 15-16.
The , which measures the strength of the greenback versus a basket of six other major currencies, soared 1.43% to close at 96.43. It marked the strongest one-day move in the dollar in 2015.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
EUR/USD suffers worst day since Jan. after ECB hints of expanded QE
No comments:
Post a Comment