Euro Steady as ECB’s Draghi Hints at Rate Cut

The Euro remained steady on Thursday following European Central Bank President Mario Draghi hints that interest rates could be cut further in the near future.

Interest Rate Unchanged

In a keenly watched decision in Frankfurt, the ECB’s Governing Council decided to leave its benchmark interest rate for the Euro zone unchanged at a record-low zero. Both the ECB’s deposit rate and its marginal lending facility rate also remained unchanged too.

Draghi Hints

Having cut rates only last month in an aggressive monetary easing policy aggressively last month, Draghi warned that inflation could turn negative once again over the coming months. Although still confident that inflation will head back towards its target of just under 2%, Draghi added that under its mandate, he was obligated to take action in boosting growth.

Federal Reserve

Having taken a dovish stance, attention will now move from the ECB to the Fed. Next week the Federal Reserve are to make their interest rate decision and many feel that a rate cut by the ECB may allow the Federal Reserve to aggressively tighten monetary policy whilst  keeping short-term interest rates unchanged. In it’s first two meetings this year, the FOMC has kept the benchmark Federal Funds Rate the same in a targeted range between 0.25% and 0.50%.

The EUR/USD was up 0.02%, trading at 1.1290, whilst the EUR/GBP was up 0.03%, trading at 0.7783.

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Daniel Simmons