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European Central Bank Lowers Benchmark Interest Rate to 3.25%
Thursday, 06 November 2008 11:48:31 GMT  |  DailyFX Research
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The ECB cut rates by 50 bp, with the key refi rate now at 3.25%. This was in line with consensus expectations, but there had been some speculation of a bolder move, especially after the BoE cut rates by a massive 150 bp earlier today. As usual there was no statement with the announcement but the press conference, starting at 13.30GMT is likely to leave the door wide open for further cuts at coming meetings and we see room for cuts down to 2% next year.

Meanwhile,Euro-Dollar (EURUSD) dropped sharply after ECB cut rates by 50 bps. EUR-USD traded over a 100 pips lower to hit 1.2774 before it reclaimed the 1.2800 handle. The market will for an insight in to the decision at the accompanying press conference. The market was clamoring for a more aggressive ECB move after the bold BoE rate cut, but ECB moved in line with market expectations. However, the press conference should indicate scope for more easing ahead, which could encourage more Euro selling on strength.

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