A historic move by the ECB: it sets a negative deposit rate of 0.10% while cutting the main rate to 0.15%. The ECB has also announced that more steps are to be announced in the press conference. The ECB was expected to cut all the rates by 0.10-0.15%, including setting a negative deposit rate: “punishing” banks for parking money with the ECB, thus triggering more lending to the real economy or outflows from the euro-zone. The accompanying press conference is at 12:30 GMT. Join a live blog of the all-important event.
EUR/USD traded around the 1.36 level towards the publication. The recent range was 1.3585 to 1.3650. The initial rate was a fall to 1.3586 and then shoots to 1.3645 before plunging once again.
Here it is: ECB Live Blog: Draghi to deliver even more
Analysis: Did Draghi make a critical mistake with forward guidance?
Update: the ECB also promises more actions in the press conference. This adds pressure on the euro and sends EUR/USD to support at 1.3560.
The 0.25% corridor between the main rate and the deposit rate is maintained. Beforehand, some cuts included a narrowing of the corridor. The marginal lending rate was cut to 0.4% from 0.75% beforehand. This is the least important rate. The negative deposit rate is certainly historic.
EUR/USD doesn’t stop and falls below 1.3560. The total range so far is 90 pips in the immediate aftermath of the big announcement.
Mario Draghi said that the governing council seems comfortable to act in June and this triggered a lot of speculation about the move. And now, it is delivery time.
For all the options and potential reactions, here is the ECB Preview: Going negative and beyond – 6 options for Draghi
And another opinion: A negative deposit rate is not necessarily euro-negative
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