The Euro (EUR) advanced by more than 0.50% against the Pound (GBP) and advanced against the US Dollar (USD) on Thursday due to comments made by a Bank of England Policy maker and as the European Central Bank, chose to leave interest rates unchanged at the record low level of 0.05% and shifted its focus to a new asset-buying plan.
Early in the session the Euro was under pressure and hovering close to two-year lows against the Pound and US Dollar after a report showed that Eurozone Producer Price Inflation (PPI) fell at a faster than forecast pace. The report showed PPI fell by 1.4% on an annual basis, a sharper decline than the 1.2% drop expected by economists.
As the session progressed, the Pound declined steeply against the majority of its most traded peers after Bank of England Policy Maker Ben Broadbent suggested that the UK’s economic recovery may not be as strong enough to justify the Bank to increase interest rates.
‘As far as the local UK fundamentals are concerned, upside surprises on data are petering out a bit. The Pound’s depreciation against the Euro was mostly driven by position adjustments. The Euro has come a long way, and people don’t want to be too short just in case Draghi doesn’t step this dovish rhetoric,’ said a forex strategist from UniCredit Bank AG.
Protestors Greet ECB Meeting
The ECB policy meeting, which was held in Naples, Italy, was met by demonstrators who were protesting against the banks austerity measures and lack of progress in tackling high unemployment. Television images showed riot police preventing protestors from entering an 18th century royal palace where ECB President Mario Draghi addressed the media.
Protestors chanted angry slogans and held a banner saying; ‘Job insecurity, poverty, unemployment, speculation. Free us from the ECB!” Speakers were heard to attack the ECB’s spending cuts and the continuingly high unemployment levels still prevalent across Europe.
ECB Holds Rates, Shifts Focus
The Euro pushed higher after the ECB announced that it chose to leave interest rates at record low levels and had shifted its focus to recently announced asset buying programme.
Draghi told reporters that the central bank will begin to buy covered bonds this month and plans to buy asset backed securities during this quarter in an attempt to increase the ECB’s balance sheet and improve lending.
Against the US Dollar, the Euro was able to hold onto gains despite the release of data which showed that the number of Americans filing for unemployment benefits fell unexpectedly last week.
The report released by the Washington based Labour Department showed that the number of claimants fell by 8,000 in the week ending on September 27. Continuing jobless claims also fell to an eight-year low.
Euro Exchange Rate News:
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