The key event for the single European currency has already revealed its results. Last Thursday, the governing council of the European Central Bank assembled for a meeting and adopted some resolutions which facilitated a sharp drop of the euro versus the U.S. dollar.
After the speech of ECB President Mario Draghi the euro sank below the support level of $1.3. As of 09:00 Moscow time, the European single currency was trading at $1.293.
The ECB decision to make a series of all rate cuts led to a sharp slump in the euro exchange rate. Nevertheless, the recent eurozone’s macroeconomic data have proved inevitable slowdown of the economic recovery. In this context, the recession fears were strong enough to prompt the ECB to introduce a new accommodative monetary policy. Here are the newly adopted bank rates. The key lending rate was lowered to 0.05% from 0.15%. Overnight bank deposit rate was cut down to the lowest ever negative 0.2% from negative 0.1%. Thus, the European regulator appeared to be the first among influential central banks worldwide to set the negative deposit rate. The effort was made with the aim of encouraging banks to lend free funds to other financial institutions instead of holding them in the ECB.
Importantly, the European Central Bank is in the early stage of the accommodative program for bolstering the eurozone’s economy whereas the U.S. Federal Reserve is about to complete it. Therefore, the U.S. dollar enjoys an advantage over its European rival.
