Article by ForexTime
The EUR/USD tumbled to a fresh 1-year low on news that the European Central Bank cut its refinance rate along with its deposit rate. Support is now seen near the June 2013 lows at 1.2755, where resistance is seen near former support at 1.31. Momentum on the currency pair is negative with the MACD (moving average convergence divergence index printing at its lowest levels in the past 12-months.
ECB cut rates by 10 basis points, with the refinance rate now at a record low of 0.05%. The deposit rate was reduced to -0.20% and the marginal lending rate to 0.30%. The focus is now on the press conference where traders a awaiting an announcement on the details of its ABS purchase program, which will reportedly see the ECB buying 500 billion Euros of assets over 3 years. Together with the TLTRO program that starts this month, the measures are hoped to revive lending to companies and support the economy.
German July manufacturing orders jumped 4.6% m/m, much stronger than expected and a solid rebound after two months of contraction. The 3-months trend rate still fell further into negative territory at -0.9%, but the annual rate rebounded and rose 4.9% y/y. So far German PMI readings have remained above the 50 point no change mark, pointing to congaing expansion and the strong July orders number will dampen concerns that the tensions with Russia will derail the German recover and give the hawks at the ECB something to argue with. Still, overall growth this year will clearly be lower than initially expected.
The BoE left policy unchanged as widely expected, which maintains the repo rate at 0.5% and the QE total at GBP 375 bln, Although two of the nine members dissented in favor of hiking rates by 25 bp in August, the dovish majority remain in the ascent as inflationary and wage pressures remain very benign despite the improving economy.
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