The built up pressure in the Euro was released minutes ago as the European Central Bank decided to cut rates yet again this morning. This was widely expected, though the Euro nevertheless fell 1.35% against the US Dollar after the decision.
The Interest rate on excess reserves is now set to -0.40% given the ECB’s latest move. A Reuters report did factor in the possibility of adoption of tiered interest rates similar to that of the Bank of Japan. The Euro is now down to 1.0859 against the dollar.
Jennifer Vail, head of fixed-income research at U.S. Bank Wealth Management in Portland, Oregon, had said ahead of the ECB decision that market expectations have gone overboard as far as a rate cut is concerned. However, the ECB has done pretty much what the market expected of it, and perhaps a little more.
Markets to remain cautious
Meanwhile, the greenback maintained its resilience against the Japanese Yen during today’s early trade. USD/JPY was up by 0.20% to 113.57. A diminished buying interest was seen for Yen after China posted better-than-expected consumer price growth in February. As per the official data, China’s CPI in February grew 1.6% beating expectations of a 1.1% gain. At the same time, producer prices fell 4.9% year-on-year, in line with expectations.
Apart from this, CPI numbers for February in Japan fell 0.2% but came above expectations of 0.3% fall. According to Tokyo-based Masashi Murata, strategist at Brown Brothers Harriman, the currency market is likely to remain cautious until the conclusion of the BOJ policy review next week.
Elsewhere, the British Pound traded weaker against the greenback at 1.4142, down by 0.4%. The U.S. Dollar Index added over 1% to 98.25 following the ECB decision.