Currency Note Euro

The ECB (finally) acts to boost the Eurozone economy

By Smart Currency June 6th, 2014

All the data releases this week for the Eurozone supported the European Central Bank’s (ECB) interest rate decision made yesterday. On Monday we saw German inflation figures coming in below expectations at a negative -0.1%, sending alarm bells. The anxiety was justified on Tuesday, which saw euro-zone inflation figures released – these were significantly worse than expectation. Falling inflation has been a key concern for the ECB and one of the key drivers behind the lobby for lowering interest rates at this week’s meeting. At this point, the market chatter was mainly focused around how much the ECB would lower the interest rate and the potential for any further monetary stimulus, rather than whether or not the ECB would act.

Yesterday the ECB decided to lower the interest rate, from 0.25% to 0.15%. The euro has been sliding since March and the decision was much in line with what the market expected. There were no surprises here, and the forward guidance that ECB President Mario Draghi has been pushing since March seemed to have helped keep markets calm. The ECB also made it clear that they going to increase funds available to Eurozone in a bid to help boost the Eurozone economy. Today there is little information worth of note released, other than German Industrial production figures. However, market movements may still reflect sentiments stemming from the rhetoric from the ECB press conference yesterday afternoon.