As widely predicted, the European Central Bank lowered interest rates on the Euro for the third time this year. Interestingly, yesterday’s decision marked the first back-to-back cut in over a decade, perhaps indicative of a growing sense of urgency to address the Eurozone’s poor economic performance over the past couple of years. The latest intervention brings the overall target rate down to 3.4% and the consensus among analysts is that this is likely to be further lowered over the next six months. Inflation fell below the central bank’s 2% target last month, which will allow the ECB greater manoeuvrability moving forward.
Despite the move being heavily telegraphed, the Euro fell a further 0.3% yesterday, bringing the common currency down to $1.083. The Dollar currency index rose again during Thursday’s session, bringing it back up to levels not seen since early August. As we move closer to the US presidential election, now less than three weeks away, markets can expect electoral politics to play a greater part in affecting currency markets.
Better-than-expected economic data in the US contributed to the Dow Jones establishing yet another record high yesterday. Retail sales rose 0.4% month-on-month in September and last week’s jobless claims came in at just 241k compared to predictions of 260k. On the other side of the Pacific, Chinese economic figures made for good reading this morning. Unemployment rate, industrial production, retail sales and GDP all beat expectations, although it remains to be seen whether the data will be enough to ease investor fears.
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