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ECB Cuts Interest Rate to 0.50%, but Euro Still Rises

Benjamin Spier

THE TAKEAWAY: ECB cuts the interest rate to 0.50%, as expected -> Draghi to discuss monetary policy later today -> Euro rises as rate cut meets expectations

The European Central Bank cut the benchmark interest rate from 0.75% to 0.50%, as was expected by majority of Bloomberg surveyed analysts.

The ECB had left the interest rate at 0.75% since the rate was cut 25 basis points in July 2012. Following the April meeting, President Draghi said he is willing to cut interest rates if the economy deteriorates further and they are considering additional measures. Draghi further said ECB policy will remain accommodative for as long as necessary.

The Euro did not show a significant reaction to the rate cut, and even gained about twenty five points to 1.3175 against the US Dollar, as a “buy the rumor and sell the news” strategy may have ensued following the meet of expectations. EUR/USD may next see resistance by a two-month high set yesterday at 1.3242.

ECB President Draghi will hold his monthly press conference at 12:30 GMT to discuss the central bank’s rate decision. Join Currency Analyst Chris Vecchio for live coverage of the press conference.

EURUSDDaily: May 02, 2013

ECB_Cuts_Interest_Rate_to_0.50_but_Euro_Still_Rises__body_eurusd_daily_chart.png, ECB Cuts Interest Rate to 0.50%, but Euro Still Rises

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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