ECB Rate Cut Leads To Euro Sell-Off

November 7, 2013

After being stuck in a trading range for the past couple of days, the euro finally broke out to the downside and fell hard against the dollar after the ECB rate announcement.

Markets were caught by surprise after the ECB lowered its main interest by a quarter percentage point to a record low 0.25 percent from 0.5 percent. Soft inflation in the Eurozone was the main culprit.
The euro slid by over 130 pips immediately after the news and then continued lower as the US session came around. Also ECB President Mario Draghi began to speak at a press conference and was already sounding dovish.

EURUSD ended the European session with a 1.13 percent loss, ending at $1.3370. EURJPY fell 1 percent to 132.03.

The Bank of England announced its monetary policy just before the ECB and left its benchmark rate unchanged at 0.50% and its asset purchase program 375 billion pounds.

GBPUSD slid to a session low of $1.6017 before ending at $1.6042, losing 0.2 percent.

The dollar rose against the yen, to end the European session at 98.74. US GDP data as well as US jobless claims were released as the US session came around and strong GDP data boosted USDJPY to above the key 99.00 level, towards 99.35.

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