Business News

Euro slides after ECB shocks markets with interest rate cu

In early trade, the FTSEurofirst 300 index of top European shares was down 0.1pc at 1,399.68 points, retreating from a 6-1/2 year high hit in the previous session.

The euro nursed hefty losses, having suffered its biggest one-day fall in nearly three years against the greenback after the European Central Bank delivered a fresh round of stimulus and promised even more if needed.

The common currency slumped over 1 percent against most of its major peers and notched a 1.6 percent drop on the dollar – the biggest one-day decline since November 2011.

The ECB cut interest rates to fresh record lows and announced plans to buy asset-backed securities (ABS) and covered bonds in October.

“While President Draghi declined to provide a size estimate for the asset purchase program, he indicated that…the ECB aimed to increase its balance sheet back towards levels seen in 2012, which would imply a roughly 1 trillion euros, or a 50 percent increase, from current levels,” analysts at BNP Paribas wrote in a note to clients.

Euro zone equities and sovereign bonds all rallied pushing the two-year yields in Austria, Germany, the Netherlands and France into negative territory.

The euro skidded to a 14-month low of $1.2920, bringing into view the July 2013 trough of $1.2898. It hit a one-month low of 135.97 yen and carved out a 15-month trough of A$1.3798.

“Although investors may be reluctant to short the euro at these levels, we argue that the current weakening trend can continue,” analysts at Barclays said.

Article Source: http://tinyurl.com/kbwqb42

< Back to Business News