As the result of the recent meeting that took place in early December, the European Central Bank cut the deposit rate from -0,2% down to -0,3%. This decision is confirmed by the official meeting minutes released shortly after the event.
It should be noted that the central bank’s decision seems to have met the expectations expressed by those analysts who were interviewed by Bloomberg. Meanwhile, ECB President Mario Draghi is reported announced a new round of stimuli during the press conference following the mentioned ECB meeting. According to Market Leader, he was expected to reveal new macroeconomic predictions made by the ECB for the Eurozone economy.
To a certain extent, all the Bloomberg interviewees had expected more stimuli coming from the central bank in the near future. Most of them (2/3) had predicted the mentioned deposit rate cut along with QE extension and further asset purchases, Masterforex-V Academy reports.
The experts underline that these are complementary measures since QE is limited to some extent. For example, the ECB is not capable of purchasing public bonds with a yield below the newly-set deposit rate of -0.2%, which limits the range of such assets to 12% of Eurozone bonds. With that said, the recent deposit rate cut may extend the list of the assets eligible for purchasing in case the central bank does decide to the expand the asset purchase program.
The news has been having a positive impact on the common European currency. In particular, EURUSD rallied all the way up to 1.0884, which is a 2.58% increase as opposed to a 0.6% slip (relative to Wednesdays’ quotes) preceding the rally, Masterforex-V Academy reports.
At the same time, Stoxx Europe 600 dropped by 0,2% to 383.45 points after rallying 0.9% earlier on the day.
