Euro drops to new low as ECB cuts rates and introduces QE program

 

The European Central Bank today cut all key rates by 10 basis points and announced plans to buy asset-backed bonds and covered bonds in October.

The Euro dropped below $1.3000 for the first time since July 2013.

“The rate cuts have clearly taken the market by surprise judging by the immediate euro reaction,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “It’s clear the ECB wants a weaker euro and they are prepared to do what is necessary to get it.”

Kinsella said Commerzbank forecasts the euro will fall to $1.25 by end of March 2015.

Even as the rate cuts and stimulus program were to prevent a slide into deflation, Mario Draghi, ECB President said today at the news conference, “We have to say things as they are. We don’t see deflation.”

Adding that, “The greatest component in falling prices is related to falling energy and food prices and an appreciating euro”.

He also adds that the ECB was ready to embark on ‘additional unconventional instruments within its mandate’ to combat falling prices.

The Euro is currently trading at $1.3005.