ECB Cuts Rates, Announces New QE Program, EURUSD Slumps Below 1.10

Chancellor Sajid Javid is understood to be considering blocking the deal on national security and to ensure the stability of the UK financial system

Chancellor Sajid Javid is understood to be considering blocking the deal on national security and to ensure the stability of the UK financial system

The pound initially jumped 0.3 per cent against the euro on the news to hit €1.1239, as the single currency registered a sharp fall.

The Euro went back and forth wildly during the trading session on Thursday, as the European Central Bank announced that they were cutting rates and that of course have chose to buy unlimited bonds.

Interest rates were cut by 0.1% to their lowest ever level of -0.5%, and the bank will start purchasing €20 billion worth of bonds each month from November.

In addition, the ECB will introduce tiering, a mechanism created to partially exempt banks from paying interest on excess cash deposited with the central bank.

It was also ECB President Mario Draghi's final policy decision, before he retires on October 31 - and is succeeded by International Monetary Fund (IMF) chairman Christine Lagarde. Markets do not expect rates to rise for almost a decade.

The central bank also extended a promise to keep rates at record lows for as long as necessary.

In critical comments less than an hour after the ECB decision, Trump used a tweet to attack the Fed for its lack of action: "European Central Bank, acting quickly, Cuts Rates 10 Basis Points".

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The outgoing president of the European Central Bank said he expected interest rates to remain at their present or lower levels until inflation accelerates across the eurozone.

Data earlier on Thursday showed euro zone industrial production fell for a second month in July, while Germany's Ifo institute predicted a recession in Europe's economic powerhouse in the third quarter.

The Australian dollar, meanwhile, was steady at 68.6 United States cents. U.S. President Trump reacted negatively.

Not easing in sync with the Fed risked pushing the euro higher, which would then dampen inflation and put the bank even further away from its targets. Council members including Jens Weidmann and Klaas Knot, central bank governors for Germany and the Netherlands, respectively, came out against the move.

The bigger-than-expected stimulus will increase pressure on the U.S. Federal Reserve and Bank of Japan to ease policy next week to support a world economy increasingly characterized by low growth and protectionist threats to free trade.

With Lagarde taking over on November 1, some also argued that the ECB should refrain from making long-term commitments that would tie the hands of the bank's next president.

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