Euro to Pound Exchange Rate Drops, EUR/USD at Four-Month Low after ECB Decision
The Euro exchange rate posted widespread losses after the European Central Bank delivered its interest rate decision.
If you're looking to make an international money transfer, we recommend TorFX.
The EUR/GBP pairing shed 0.60 per cent and struck a fresh 16-month low while the EUR/USD exchange rate was languishing in the region of a four-month low, having lost 0.40 per cent.
The threat of deflation has been hanging heavily over the Eurozone over the last few months, and in order to counter the headwinds still facing the region the ECB opted to introduce a negative deposit rate.
The institution cut the deposit rate to 0.1 per cent and is the first of its kind to take such action.
A cut to the key interest rate was also applied, and it fell to 0.15 per cent.
Furthermore, ECB President Mario Draghi outlined several additional stimulus measures, including bringing an end to asset purchase sterilisation and bringing in targeted long-term loans.
During his press conference in Frankfurt Draghi asserted; ‘We decided on a combination of measures to provide additional monetary policy accommodation and to support lending to the real economy.’
Earlier in the European session the Euro had been supported by positive German factory orders and Eurozone retail sales data.
The common currency had held steady against Sterling and the ‘Greenback’ as factory orders in the Eurozone’s largest economy were shown to have risen by 3.1 per cent in April, month-on-month, rebounding from the decline of 2.8 per cent recorded in March.
The result prompted this response from economist Alexander Koch; ‘We see fairly balanced, robust growth in Germany at the moment. There is volatility in the monthly data but everything points toward ongoing expansion this year.’
Meanwhile, retail sales in the 18-nation currency bloc were shown to have rallied by 0.4 per cent in April month-on-month rather than stagnating as expected.
On the year sales in the Eurozone were up 2.4 per cent, twice the annual gain of 1.2 per cent forecast.
The French and German retail PMI’s both printed above the 50 mark separating growth from contraction, but the Eurozone’s Markit retail PMI came in at 49.9 in May, just down from the 51.2 level recorded the previous month.
However, any Euro strength wilted in the face of the ECB announcement and the common currency is struggling against almost all of its rivals.
Euro weakness may well persist in the days ahead, but further movement in the common currency could take place tomorrow in response to German import/export figures, German industrial production data and the German trade balance report.
The US non-farm payrolls data could also have an impact.
Currently the Euro is trading against the British Pound in the region of 0.8079 and is trading against the US Dollar in the region of 1.3538.