Forex News: Euro Jumps Slightly Higher as ECB Keeps Interest Rate Unchanged

DailyFX

THE TAKEAWAY: ECB keeps interest rate at 0.75% following its January meeting -> Negative growth in Q4 could raise pressure for monetary action -> Euro trading slightly higher

Following its January meeting, the European Central Bank decided to keep its interest rate at 0.75%, as was expected by most Bloomberg surveyed analysts. The interest rate has remained at 0.75% since July of 2012. At 13:30 GMT, ECB President Draghi will hold a briefing about the central bank’s rate decision and other monetary policy.

The Euro-zone has been in a technical recession since the announcement of the negative GDP growth in the second and third quarter of 2012. If the Euro-zone economy declines again in Q4, it could add to pressure for the ECB to cut the interest rate, which would be Euro negative. Euro-zone inflation fell to 2.2% in December.

Draghi has previously said that he prefers less traditional monetary tools, like the OMT bond purchase plan, in place of cutting the interest rate. The threat of OMT has done a good job at keeping Spanish and Italian bond yields lower; a Spanish bond sale earlier today outperformed a 5 billion Euro maximum target.

The Euro saw a slight jump in Forex trading following the news of the ECB decision. EURUSD rose to 1.3100 during the European session after the announcement of the successful Spanish bond sale. The pair may see resistance at 1.3158, where it has seen some resistance over the past few months, and it may see support by the key 1.3000 line.

EURUSDDaily: January 10, 2013

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