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The European Central Bank cut its benchmark Minimum Bid Rate from 1% to 0.75%, as expected. The deposit rate was eliminated – from 0.25% to 0%.  

EUR/USD was trading around 1.25 before the release. The initial reaction was a big fall to 1.2480. Trading remains choppy. Update: the pair fell as low as 1.2463 before bouncing. It remains above resistance at 1.2440. Update 2: the pair continues deeper, and touches 1.2450.

EUR/USD lost almost all the gains made after the EU Summit last week. The marginal lending rate was cut to 1.50%.

Update:  Follow the live blog of the ECB press conference.

This sharp downwards move puts a lot of pressure on the Swiss National Bank that is struggling to maintain the 1.20 floor under EUR/CHF. Will the floor break?

Read more about EUR/AUD and EUR/CHF here.

Recent economic indicators in the euro-zone all point to a deeper recession. This includes forward looking PMs, a higher unemployment rate and lower business sentiment.

The ECB’s single mandate is to keep price stability, with headline CPI at or a bit below 2%. Inflation was above the target so far, but also showed signs of easing lately, supposedly removing German objection to any cuts.

The president of the ECB Mario Draghi passed the ball to the court of the politicians in many public appearances. In the EU Summit, held only one week ago, Draghi got at least part of what he wanted: politicians took steps to tackle the debt crisis and also gave the ECB more authorities as a banking sector supervisor.

The Bank of England expanded its QE program by 50 billion pounds, as expected. The People’s Bank of China surprised by cutting the deposit rate by 0.25% to 3% at the same time. The world’s central banks are easing at the same time.

Draghi will hold a regular press conference at 12:30 GMT to explain the decision and perhaps to announce other steps. Follow a live blog of the presser.