European Central Bank cuts interest rate by 50 basis points. Euro mixed in forex trading. | CountingPips Forex Blog

January 15, 2009 - Forex Economic News

European Central Bank cuts interest rate by 50 basis points. Euro mixed in forex trading.

The European Central Bank announced today that it lowered its main interest rate by 50 basis points in response to the Eurozone's weakening economy. Today's reduction brings the interest rate down from 2.50 percent to 2.00 percent and follows the last rate reduction on December 4th when the rate was slashed by 75 basis points. The ECB also reduced the Euro mixed in Forex Trading interest rate by 50 basis points in each of October and November. Today's rate announcement was in line with the forecasted market expectations of a 50 basis point reduction and brought the rate to match its lowest level since 2005. The Eurozone officially entered its first recession in 2008 when the GDP declined for two consecutive quarters. The third quarter GDP declined by 0.2 percent following the second quarter 0.2 percent decline.

Jean-Claude Trichet, the President of the ECB, commented on the economic situation to reduce the interest rate, "This takes into account the latest economic data releases and survey information, which add clear further evidence to the assessment that the euro area is experiencing a significant slowdown, largely related to the effects of the intensification and broadening of the financial turmoil. Both global demand and euro area demand are likely to be dampened for a protracted period. Monetary expansion is moderating further, supporting the assessment that inflationary pressures and risks are diminishing. All in all, the level of uncertainty remains exceptionally high."

Other news released out of the Eurozone today showed that the consumer price inflation rate declined by 0.1 percent in December to register an annual rate of 1.6 percent according to a release by EuroStat. December's inflation data follows November's monthly decline of 0.5 percent and annual rate of 2.1 percent. The core inflation rate for December, excluding food and energy prices, registered a 1.8 percent annual rate following November's 1.9 percent annual increase.

Euro mixed in Forex Market trading.

The Euro fell this morning in forex trading immediately after the interest rate announcement but has made up ground since then against some of the other major currencies. The euro opened trading today at approximately 1.3179 dollars per euro and has fallen to trading at 1.3107 in the afternoon of the U.S. trading session at 1:52pm EST. The euro is falling versus the American currency for the fifth straight day in trading.

The euro has also been falling versus the pound today as the EUR/GBP has declined to 0.8968 from 0.9020. The euro has gained ground versus the Japanese yen for the first day this week as the EUR/JPY has advanced to 117.69 after opening the day at 117.22. Elsewhere today, the euro has declined versus the Australian dollar and New Zealand dollar while gaining against the Swiss franc and Canadian dollar.

EUR/USD Chart - The Euro falling today against the US Dollar and falling below the 55 day simple moving average. (Daily Chart).

Today's Forex Chart

tags: Eurozone, interest rates, ECB, Trichet, Euro, Forex Trading

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