Turkey’s central bank governor was at a crossroads: to hold interest rates and take a risk to be fired like it was for three governors before him, or to comply with the president, to cut rates, and to risk the market. Let’s find out, how to react to the rate cut.
Euro strengthens versus greenback on optimistic comments of Draghi
On Thursday, the currency pair EUR/USD rallied during a volatile session on optimistic comments by the head of the European Central Bank Mario Draghi as for the prospects for the euro zone's economic growth. At the time of publication, versus the evergreen buck the common currency added to 12198 gaining 0.3%, having dived to 1.2160 area earlier.
The ECB, following the meeting, expectedly kept all the parameters of the monetary policy intact. To be exact, the basic interest rate on loans was left at zero level; the deposit rate was left at the level of minus 0.4%, the rate on margin loans remained at 0.25%. As for the main wording of the statement following the gathering, it remained the same too. It also applies to the volume of incentive programs (the EU’s key financial institution will keep buying assets of 30 billion euros a month until the end of September this year or even longer if required). The buying of assets will continue until the Board of Governors observes a steady correction of the inflation trajectory in compliance with the target level, as the ECB informed.
ECB President Mario Draghi, delivering a speech at a press conference following the gathering, expressed confidence in the economic performance of the eurozone, notwithstanding the recent slowdown in surge. Additionally, the ECB Governor stressed that he closely watches the strengthening of the common currency, but added that the regulator didn’t discuss the volatility of the exchange rates at the gathering.
Draghi pointed to a number of temporary factors, which contributed to the recent deterioration in several major economic reports. Among them were strikes, cold weather as well as Easter holidays.
Besides this, ECB Vice President Vitor Constancio told that the ECB could get back to utilizing non-traditional monetary policy instruments for the purpose of stimulating the recovery of the euro-zone economy.
The OPEC meeting and the US Nonfarm Payrolls rocked the market last week. The market is torn between optimism about the global economic recovery and concerns about the new coronavirus strains.
Once in a month, the euro has a very special day of increased volatility at the start of the European trading session.
The US dollar is heading to close the seventh day in the red as it remains under selling pressure. The US data at 15:30 GMT+3 (jobless claims and Philly Fed Manufacturing Index) may support the greenback if it's strong.
Canada will publish the Retail Sales and Core Retail Sales on October 22, at 15:30 MT time (GMT+3).
The United States will release the weekly Unemployment Claims on October 21, at 15:30 MT time (GMT+3).