ECB Defies Expectations and Keeps Interest Rate Unchanged
THE TAKEAWAY: ECB keeps interest rate unchanged -> Anticipation builds for possible ECB bond purchase plan -> Euro trading slightly higher
The European Central Bank kept its interest rate at 0.75% and diverged from expectations for the bank to cut the interest rate to 0.50%.
The interest rate was cut to 0.75% in the July ECB meeting, but economic indicators continue to worsen in the Euro-zone, including a revised estimate that the 2Q GDP fell 0.2%.
However, the interest rate decision only gave the Euro a small boost as traders remain focused on ECB President Draghi’s press conference which is scheduled for 12:30 GMT. There Draghi could announce an ECB bond purchase program to help struggling Euro nations, which could bring a significant boost for the Euro.
In other economic news, there were reports released today that the Troika will submit its Greek report on October 8. Greek unemployment was report at 24.4% in June, higher than expectations for the unemployment to remain at May’s 23.5% rate.
Also, Bundesbank’s Dombert said that ECB bond purchases shouldn’t become the new norm, but he admitted that the bond purchases would reduce pressure on the government. The comments were not as sharp as the opposition to the plan given by Dombert’s colleague Jens Wiedmann.
EURUSD jumped nearly 30 points above the 1.2600 key level following the ECB decision, which could provide support in future trading. Possible resistance could be provided by a month-long upward trend channel around 1.264.
EURUSD 15-minute: September 6, 2012
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