Dollar Rally Fizzles Despite ECB Rate Cut

June 5, 2014

Washington (June 5)   The dollar gave back early gains versus the euro on Thursday, falling from 4-month highs despite unprecedented easing measures by the European Central Bank .

The ECB cut its central refi refinancing rate to 0.15%, from 0.25% previously.

They also lowered the rate at which the central bank pays commercial banks for depositing their unused cash into negative territory for the time, cutting it from zero % to minus 0.10%.

The ECB, with its lone mandate to provide price stability across the 18-nation euro zone, made the move in order to combat deflation and spur lending.

The ECB also said more stimulus is on the way in the form of an undetermined amount of asset-backed security purchases.

The buck initially spiked higher to USD1.35 on the news, but later fell back to USD1.3620 against the euro.

Early gains also quickly evaporated versus the sterling, as the buck slipped to USD1.68 by mid-day.

The Bank of England decided to keep its record-low interest rate intact to reinforce the economic recovery despite seeing signs of overheating in the property market.

The dollar eased very slightly to Y102.50 versus the yen.

In economic news from the US, the Labor Department released a report showing a modest rebound in initial jobless claims in the week ended May 31st .

However, the four-week moving average still fell to its lowest level in about seven years.

The report said initial jobless claims rose to 312,000, an increase of 8,000 from the previous week's revised level of 304,000.

Source: Alliance News

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