Euro is struggling today, following the latest decision from the European Central Bank. As expected, interest rates remain where they were set last month. However, some were surprised that ECB policymakers have yet to move on other stimulus measures.
Thanks in large part to policy divergence, the euro is struggling against many of its major counterparts today. The ECB announced that it is keeping its refinancing rate to 0.15 per cent and the deposit rate to minus 0.1 per cent. These changes were announced last month, in June. Mario Draghi also announced that further easing, possibly through asset purchases, could be used to stimulate the eurozone economy.
This month, no such stimulus was announced. Policymakers are waiting a few months to see if the rate cuts can help spur economic growth. Eurozone inflationary pressures do seem to be picking up a bit, although the rate is still well below the desired targeted inflation. Additionally, the lack of more stimulus this month prompted a decline in German bond prices, with yields rising two basis points.
For now, policy divergence is likely to drive the Forex market.
At 12:54 GMT EUR/USD is down to 1.3613 from the open at 1.3659. EUR/GBP is down as well, dropping to 0.7949 from the open at 0.7957. EUR/JPY is down to 139.0360 from the open at 139.0155.
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