{"id":59850,"date":"2014-09-04T09:21:19","date_gmt":"2014-09-04T13:21:19","guid":{"rendered":"http:\/\/countingpips.com\/?p=59850"},"modified":"2014-09-04T09:48:16","modified_gmt":"2014-09-04T13:48:16","slug":"an-unexpected-move-from-the-ecb","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/09\/an-unexpected-move-from-the-ecb\/","title":{"rendered":"An unexpected move from the ECB"},"content":{"rendered":"
September 4, 2014<\/div>
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Article by ForexTime<\/a><\/p>\n

The ECB has just shocked the market with the news that not only have they cut rates to a new record-low 0.05%, but they\u2019re also going one step further by increasing negative deposit rates to 0.2%. Although there was a chance of a further rate cut following weak data in August, I didn\u2019t expect them to instigate negative deposit rates as well.<\/p>\n

This surprising move does showcase how eager the ECB are to encourage banks to lend again, and they clearly see negative deposit rates as an alternative way to improve inflation levels without resorting to what must be very much a last resort tactic to boost CPI levels \u2013 quantitative easing. \u00a0As a result, the EURUSD has already dropped to a 14-month low, 1.30 on the news but I now see an opportunity for the EURUSD to perhaps decline towards 1.28 by the month\u2019s end.<\/p>\n

The ECB\u2019s surprising moves today are only going to further weaken the EU economic sentiment. Equally, it seems almost unofficially confirmed that the United States is going to conclude quantitative easing by October. This will further increase demand for the USD because many investors are hoping the Federal Reserve will raise rates sooner than expected, due to a substantial improvement in US economic data.<\/p>\n

The GBPUSD was also a casualty today, declining to a near seven-month low, 1.6394, following the Bank of England\u2019s decision to keep interest rates unchanged. A decline in UK CPI in August was seen as the main catalyst for the BoE to leave rates unchanged again in August. However, the ECB acting today may provide influential as well in further downside movement in the GBPUSD.<\/p>\n

During August\u2019s BoE Inflation Report, Governor Carney did suggest that the \u201clevel of bank rate would not rise materially due to global economic headwinds\u201d and it is no hidden secret that the UK economy is very much export based, with the EU being the UK\u2019s main trading partner. \u00a0A BoE rate hike may now be further put on hold due to possible caution from the central bank that an even lower EURGBP, which has been testing 23-month lows recently, might even decline further and perhaps question UK export competitiveness.<\/p>

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Written by Jameel Ahmad, Chief Market Analyst at FXTM.<\/p>\n

For more information please visit: Forex Time<\/a><\/p>\n

Disclaimer:<\/b> The content in this article comprises personal opinions and ideas and should not be construed as containing personal and\/or other investment advice and\/or an offer of and\/or solicitation for any transactions in financial instruments and\/or a guarantee and\/or prediction of future performance. ForexTime Ltd, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

Article by ForexTime The ECB has just shocked the market with the news that not only have they cut rates to a new record-low 0.05%, but they\u2019re also going one step further by increasing negative deposit rates to 0.2%. Although there was a chance of a further rate cut following weak data in August, I […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-59850","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/59850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=59850"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/59850\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=59850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=59850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=59850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}