EUR zigzags after ECB stands pat but opens the door to more QE

July 25, 2019 (Western Union Business Solutions)  – The euro slumped to two-year lows after the ECB all but eased policy at its latest meeting. The ECB left its main interest rate at zero and the deposit rate at minus 0.40%. The ECB affirmed its low rate pledge, vowing to keep rates low for at least another year or for as long as it takes to boost growth and inflation. Barring a surprise brightening in the outlook for Europe’s economy, the stage appears set for rate cuts or other action at the next ECB meeting on Sept. 12. The euro’s tenacity so far to hold above key support triggered a short-covering rally in its favor.

GBP

The U.K. pound held its chin above 27-month lows as the market digested the cabinet makeup of Britain’s newly installed prime minister, Boris Johnson. Britain’s new leader appeared to assemble a team of mostly Brexiteers, or those who favor the U.K. leaving the EU. Underlying sentiment remains bearish for sterling after weak U.K. data offered more evidence of a decelerating economy. A gauge of consumer spending fell for the third month in a row in July, a sign that an expected slowdown in the second quarter may have bled into the third quarter.

CAD

Canada’s dollar found some footing as the price of oil rose toward $57. USDCAD largely kept to a range as traders monitored the ECB’s policy announcement and hunkered down for critical U.S. data on growth and inflation that will offer the last meaningful looks at the world’s biggest economy before next week’s Fed meeting.

USD

The U.S. Dollar Index climbed to late May highs on the back of bullish U.S. data and a dovish policy decision from the ECB. Weekly jobless claims and durable goods both surprised to the upside with the former back around half-century lows. The strong data suggested any rate cuts by the Fed would be the modest insurance variety and not the start of a full blown easing cycle. Look for America’s rate debate to be stirred by second quarter growth Friday and numbers next week on consumer spending and inflation.

 

 

 

 


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