The euro surged against other major currencies after the European Central Bank (ECB) revealed its latest monetary policy decisions. Markets had widely expected a more substantial easing package, including a deeper cut to the deposit rate and an expansion of the quantitative easing program.
ECB’s Actions
The ECB lowered the deposit rate by 10 basis points to -0.30% and extended its asset purchase program until March 2017. It also included regional and municipal bonds in the list of eligible assets for purchase. However, these measures were perceived as less aggressive than anticipated.
Market Reaction
The initial reaction to the announcement was a sharp rally in the euro. Traders who had positioned themselves for a more dovish ECB unwound their positions, driving the currency higher. Stock markets also experienced volatility, initially declining before recovering some ground.
Analysts’ Views
Analysts suggest that the market’s disappointment stemmed from overly optimistic expectations. Some believe that the ECB’s actions were sufficient to support the Eurozone economy, while others argue that more aggressive measures were needed to combat deflationary pressures.
Key Takeaways:
- Euro rallies after ECB decision.
- Market expectations for easing were not met.
- ECB extends asset purchase program but disappoints on depth of rate cut.
