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Hardy: Euro falls as ECB cuts rates & could fall further
The European Central Bank cut rates to a record low of 0.25 percent
Mario Draghi says they were responding to a slump in inflation. CPI fell to 0.7 percent in October well below its 2 percent target. “I would characterize the discussion today as being wholly in agreement about the need to act.”
The central bank also signaled another rate cut was not off the cards saying the ECB still has a “whole range of instruments” and “could in principal cut further” to address low inflation.
Despite this Draghi did insist that the Eurozone isn’t heading for deflation but the bank’s analysis indicates “that we may experience a prolonged period of low inflation.”
The euro fell sharply against the dollar, down more than 1 percent in just 30 minutes.
Saxo Bank’s John Hardy says it was a combination of the shock of the ECBs decision and the news that the US grew 2.8 percent in the third quarter that caused the sharp fall.
John says with US jobs data out tomorrow we could see more movement in the single currency. Weak US data could push the euro down to 1.30. The US labor market is expected to have added 120,000 jobs in October.
02:00 minutes
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