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EUR: ECB Leaves Rates Unchanged June 2012

The European Central Bank left the key Minimum Bid Rate unchanged at 1%. Most had expected no change. This is bad news for the European economies, which are deteriorating quite fast.

EUR/USD is almost unchanged. It initially ticked lower and then moved up. Update: Live blog is here.

This time, there wasn’t a 100% consensus towards the decision. Given many deteriorating indicators, the credit crunch that followed the Greek elections and a drop in inflation, also a rate cut of 0.25% was not ruled out by many.

1% is the lowest rate that the ECB had during the crisis. In 2011, the former president of the ECB, Jean-Claude Trichet, raised the rates twice. Mario Draghi reversed these two hikes, and also introduced the two Long Term Refinancing Operations (LTROs) – a move that temporarily kept Europe away from the abyss.

Stay tuned for a live blog of the press conference. Mario Draghi is expected to explain the decisions and will likely pass the ball to the court of the politicians, which should find a solution for the worsening debt crisis, now focusing on Spanish banks.

Some hope that Germany would be flexible on eurobonds or a banking union helped push the euro higher. However, the ECB is the most resourceful factor out there, and a lot depends on its action.

For more on the euro, see the EUR/USD forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.