Euro Weakens After ECB Rate Cut, Dollar Advances
The euro declined after the European Central Bank lowered the interest rate by the expected 25 basis points. The Swiss franc was the worst performer in the Group of 10 after the local central bank surprised the market with a bigger-than-expected rate cut. The dollar index advanced for a fifth day.
EUR/USD fell as much as 0.3% to 1.0464, but trimmed losses.
“The ECB did not surprise the financial markets today and the 25bp cut to the key policy rate has resulted in minor moves in FX and rates,” said MUFG analyst Derek Halpenny. “Lagarde acknowledges a larger cut was discussed today which we believe keeps EUR/USD risks skewed to the downside”.
“Regarding the possibility of a larger 50bps cut, we believe that the bar for such a move remains very high,” said Salman Ahmed, Fidelity International’s global head of macro and strategic asset allocation.
USD/CHF rose 0.5% to 0.8888, biggest jump since Dec. 2.
The Swiss National Bank delivered a bigger-than-expected 50 basis-point interest-rate cut as it .sought to head off gains in its currency.
“Policy rate cuts continue to be our main instrument should monetary policy have to be eased further,” SNB chief Martin Schlegel said. “At the same time, we remain willing to intervene in the foreign exchange market as necessary”.
Ahead of the decision, money markets assigned a 30% probability to a 50bps cut.
The Bloomberg Dollar Spot Index advanced 0.1%.
USD/JPY fell 0.1% to 152.25 after three days of gains.
Australia’s dollar rises the most among its Group-of-10 peers after a strong jobs report prompted traders to pare pricing of a February rate cut by the Reserve Bank.
AUD/USD up as much as 0.9% to 0.6429.
“We’re looking at a pretty substantial employment beat from Australia,” said Helen Given, a currency trader at Monex.“Bets on easing from the RBA have come down in conjunction with that, along with further whispers of a less hostile relationship than previously thought between incoming president Trump and president Xi of China - all helping AUD gain some ground back”.
Source : Bloomberg
