Euro dips after ECB pushes out rate hike and offers new bank loans
The euro dipped below $1.13 on Thursday after the European Central Bank postponed the timing of its first post-crisis rate hike to 2020 at the earliest and launched a new round of cheap loans to banks.
The decision to tweak the bank’s forward guidance on rates was a surprise for many investors, although the move in the euro was relatively small.
The single currency dropped 0.64 percent to $1.1233 from above $1.13 before the decision.
“Whilst such an announcement was expected at some point in the coming years, the market is welcoming this proactivity,” said Karen Ward, chief market strategist for EMEA at JP Morgan Asset Management, referring to the ECB moves.
Investors have been hoping for a trigger to shake the euro/dollar out of its current narrow trading range.
The currency pair has experienced a quiet start to 2019 as central banks have put off tightening monetary policy as economic momentum slows. That has left investors struggling to decide on direction.
Thu Lan Nguyen, a currencies analyst at Commerzbank, said before the ECB announcement that should the central bank tweak its guidance then the risks for the euro were “to the downside.”
The euro also fell slightly versus the Swiss franc to 1.1354 francs.
The dollar, measured against a basket of currencies, rose 0.49 percent to 97.35 as the euro sold off.
The dollar should slip over the coming year because U.S. economic growth is slowing and any boost from a resolution in the U.S.-China trade conflict is already priced in, according to a Reuters poll of strategists.