Euro Falls Back As ECB Chief Cuts 2015 Inflation Forecasts; Reveals QE Details
March 05 2015 - 9:52AM
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The euro fell back against its key counterparts on Thursday,
after the European Central Bank President Mario Draghi cut
inflation forecast for 2015 and indicated that the central bank
will start its quantitative easing program on March 9.
"We will on 9 March 2015 start purchasing euro-dominated public
sector securities in the secondary market," Draghi said at the
press conference following the ECB meeting in Cyprus.
"We will also continue to purchase asset-backed securities and
covered bonds which we started last year," he added. The QE program
will last until at least September 2016.
Draghi excluded the purchases of Greek and Cypriot bonds, as the
ECB is buying only investment-grade bonds.
The central bank President also noted that it won't buy bonds
with yields below deposit rate of minus 0.20 percent.
Inflation is likely to fall to zero in 2015, lower than 0.7
percent projected previously, he said. It is expected to pick up to
1.5 percent in 2016 and to 1.8 percent in 2017.
At its rate setting meeting in the Cypriot capital Nicosia, the
ECB held the refinancing rate at a record low 0.05 percent, in line
with economists' expectations.
The bank also held the deposit rate steady at -0.20 percent and
the marginal lending rate at 0.30 percent. The three rates were
lowered by 10 basis points in September.
In economic front, Germany's factory orders declined at the
fastest pace since last August, data released by Destatis
showed.
Factory orders fell 3.9 percent in January from the prior month,
which was the biggest drop since August, when it plunged 4.2
percent. Economists had forecast a 1 percent drop in January after
rising 4.4 percent in December.
The euro fell back to 1.1008 versus the greenback, its lowest in
more than 11 years. At Wednesday's close, the pair was valued at
1.1076. The euro may possibly face support around the 1.9 zone.
The single currency reversed from an early high of 133.58
against the yen and was trading lower at 132.34. The euro is
heading to violate its early more than 4-week low of 132.14. If the
euro continues slide, 131.00 is seen as its next possible support
level.
The euro resumed its early decline and touched more than a
7-year low of 0.7222 against the pound, after advancing to a 2-day
high of 0.7285 at 8:30 am ET. The next possible support for the
euro may be found around the 0.70 mark.
The Monetary Policy Committee of the BoE decided to retain the
key bank rate at 0.50 percent and the size of asset purchases at
GBP 375 billion at the end of the two-day rate setting meeting.
The rate has been at a historic low since March 2009. The
previous change in quantitative easing was an increase of GBP 50
billion in July 2012.
The 19-nation currency pared gains to 1.0666 versus the franc,
after rising to 1.0725 a short while ago. On the downside, the euro
may face support around the 1.00 zone.
Looking ahead, U.S. factory orders for January and Canada Ivey's
PMI for February are slated shortly.
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