Euro falls as ECB cuts benchmark rate, whilst suggesting negative deposit rates in the future.
03/May/2013 • Currency Updates•
Sterling strengthened dramatically yesterday following on from an improvement in the uk construction report combined with the events of the ECB meeting. Mario Draghi’s commented on the willingness of the ECB to further cut interest rates, even mentioning the possibly of negative rates.
The UK currency has risen 2.7% in the past months against the greenback after slipping 6.5% in the first quarter as data showed manufacutring shrank in April by less than economists predicted.
The market, as ever, waits non-farm pay rolls out of the US today.
Yesterday saw initial jobless claims post a better than expected figure, at 324k, an improvement on the previous 342k. Along with an improvement in US trade balances contributing to dollars strengthening against Euro and Sterling yesterday. This reduction in the trade deficit will boost demand for dollar, and if this trend of good data continues we could see dollar strengthen further against its major counter-parties.
Today is a big day for dollar, as eyes will be looking forward to the release of the non-farm payroll figures due to be released at 12:30GMT, as well as the unemployment rates data release. These should contribute to a lot of volatility in the currency today.
Yesterday saw the ECB cut its main benchmark interest rate by a quarter point to a record 0.5 percent. We also saw a 1.5% drop in the Euro against the greenback whereas in contrast, this cheered the Asian stocks today on hopes of a stronger global economic recovery after the euro cut interest rates and held out the possibility of further easing while the euro remained in the doldrums
Investors were also reluctant to take aggressive positions in the lead up to a U.S. non-farm payrolls report later in the day. That caution is expected to see European stocks get off to a lacklustre start. U.S. stock index futures were flat as well.