The Euro to US Dollar (EUR/USD)exchange rate and Euro to Pound Sterling (EUR/GBP) exchange rates tumbled after European Central Bank (ECB) President Mario Draghi announced plans to buy €60 billion a month of private and public debt until September 2016.
ECB announcement sends Euro tumbling
The announced €60 billion per month figure was far higher than economists had been expecting and went some way to reassure the markets that the central bank is finally starting to take proper action to tackle the threats posed by deflation and to stimulate the flagging Eurozone economy.
Previously the ECB has held off from introducing such measures due to the resistance of the Germans. President, Mario Draghi, reassured markets in July 2012 by saying he would be prepared to do whatever it took to maintain financial stability in the Eurozone, which was nicknamed as his “big bazooka” speech.
Economists had been speculating as to whether the bank would go through with introducing a Quantitative Easing programme and most had been expecting the announcement of a €50 billion per month programme prior to Draghi’s announcement.
In his press conference, Mr. Draghi said that the ECB governing council was not unanimous in its decision and reaffirmed his position that national governments must do more to aid the Eurozone economy.
‘A large majority agreed on the need to trigger it now. The majority was so large we did not need to take a vote. There were different views on the need to act now. Monetary policy can create the basis for growth to pick up you need investment and for investment you need confidence and for confidence you need structural reform,’ said Draghi.
The single currency has weakened over the course of the past six months as traders anticipated the introduction of the bond-buying programme. The sharp Euro declines began last May after the Euro peaked at its highest level since Draghi took office.
The Euro is now forecast to fall further against the US Dollar as the introduction of the QE programme further highlights the diverging trends of the US and Eurozone economies.
The ‘Greenback’ advanced even more as data showed that the number of Americans filing for new unemployment benefits fell last week from a seven month high, adding to signs that the US labour market is set to continue to improve.
Initial claims for state unemployment benefits slipped 10,000 to a seasonally adjusted 307,000 for the week ended Jan. 17, beating expectations for a 300,000 drop.
Euro Exchange Rates:
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