EUR Drops to New 2019 Low after the European Central Bank bolsters stimulus

Mar. 7, 2019 (Western Union Business Solutions)  – The euro slipped to three-week lows after the ECB left borrowing rates unchanged and announced a new easing plan to help spur faster bank lending to help resuscitate Europe’s sputtering economy. Starting in September, the ECB will launch a new round of cheap loans to banks and continue the program through March 2021. The ECB also pushed out its forecast for an eventual rate hike from after the summer to after 2019, at the earliest. That means that Mr. Draghi is poised to go his entire presidency without firing a single rate hike. The euro slid on the news and could add to its losses if the market senses the central bank is running low on tools to turn the economy around. Mr. Draghi speaks soon, remarks that will be important for currencies.

 

Brexit uncertainty pressures sterling

 

Sterling favored one-week lows amid a lack of progress on the Brexit front. Britain’s Parliament is due to vote again on Theresa May’s Brexit deal on Mar. 12. Weeks of negotiations with the EU have largely left the prime minister’s divorce deal little changed, suggesting doubts in Parliament passing it. The Brexit impasse suggests that Britain would inevitably be forced to delay its exit from the bloc to beyond Mar. 29, a scenario that would do little to lift the fog of uncertainty.

 

Loonie steadies around 2-month low

 

Canada’s dollar steadied after a central bank-inspired tumble to two-month lows. A subtle but significant shift in the outlook for Canadian interest rates reawakened loonie bears who have largely been in seclusion this year. The Bank of Canada left interest rates unchanged at 1.75% as expected and watered down expectations for a hike anytime soon given the surprising weak shape of the Canadian economy, one that it now expects to moderate further over the first half of the year. Canada’s dollar will look for direction from the job market Friday. Hiring is forecast to stall after robust gains over two of the past three months.

 

Dollar rolls to new highs after Draghi, data

 

The dollar index climbed to three-week highs, getting a double boost from the ECB’s dovish turn and better than expected U.S. jobs data. Weekly jobless claims improved more than expected with a decline to 223,000 in the latest period. The data was consistent with the job market firing on all cylinders ahead of tomorrow’s government employment data. The buck is weathering the Fed’s patient rate stance which is being offset as more and more central banks turn increasingly dovish.

 


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