The Euro to USD exchange rate fell to its lowest-level in over a month on Thursday afternoon after European Central Bank President Mario Draghi talked down the risk of deflation occurring in the Eurozone and as policy makers held interest rates at the record low level of 0.25%.
Investors weren’t impressed with the decision to leave rates unchanged in a week which saw data releases show that inflation in the Eurozone slowed to 0.5% last month, the slowest pace since November 2009.
Mario Draghi said in the press conference which followed the rate announcement that the Central Bank was ready to intervene if inflation slowed further and was determined to maintain an accommodative policy.
Most economists agree that despite no action being taken today the Central Bank will introduce some form of stimulus in the future if the inflation situation continues to worsen. They just can’t agree in what form that stimulus will come in.
“Negative interest rates are still more likely at this stage than outright quantitative easing, as the Eurozone does not have pan- Eurozone bonds to buy up so it would need to purchase a combination of bonds from Germany, Italy, Spain and the rest. It’s not decided what proportion these would need to be in, and finding agreement would be a political nightmare,” said Alistair Cotton, a corporate dealer at Currencies Direct.
Further gains for the US Dollar were restrained as data showed that the number of US citizens claiming jobless benefits unexpectedly rose last week. Another report showed that the nation’s trade deficit widened in February and the latest ISM non-manufacturing Index came in below economist expectations.
The ‘Greenback’ could push higher on Friday as investors look to the release of the eagerly anticipated nonfarm payrolls report which is expected to give a clearer overview of the strength of the US economy as the country emerges from a winter dominated by harsh weather.
Current Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3711 ,
Euro,,British Pound,0.8268 ,
Euro,,Australian Dollar,1.4864 ,
Euro,,Canadian Dollar,1.5088 ,