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European Session – Euro jumps above $1.32 after ECB lowers rate to 0.50 percent
May 2, 2013 1:49 pmVideo
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Currency markets were relatively quiet leading in to the much anticipated European Central policy meeting later in the European session.
Most major currency pairs were consolidating in early Thursday trading, digesting the news overnight from the Federal Reserve, which announced it maintained its current stimulus through bon buying, known as quantitative easing. This kept the dollar subdued.
EURUSD was mostly range bound in the early Europe trade between $1.3146 and $1.3179. There was major volatility immediately after the ECB rate announcement, which led to euro dropping 40 pips to $1.3124 then jumping back up to as high as $1.3209.
The markets took the news as a positive that the ECB is willing to do whatever it takes to help economic recovery in the euro zone.
The ECB lowered the benchmark interest rate for the first time in 10 months to 0.50 percent, down 0.25 percent from the prior 0.75 percent rate. The ECB was pressured to act in the wake of a prolonged euro zone debt crisis and falling inflation as well as record high unemployment.
Investors now turn their attention to ECB President Mario Draghi’s press conference at 1230 GMT to listen for hints on other policy action.
EURJPY jumped to a high of 128.87 yen soon after the announcement, then continued to advance higher as Draghi began to speak, rising towards 129.89 yen, up 1.4 percent from the session open of 128.08 yen.
Sterling gained against the dollar after UK construction PMI data surprised higher in April, helping lift GBPUSD to $1.5589, up 0.2 percent from the session open of $1.5549.
Dollar was steady against the yen during most of the session, supported above the key 97.00 level during the past three days. USDJPY began extending higher after US data, rising towards 98.38 yen after being boosted by lower initial jobless claims numbers.
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