FRANKFURT (dpa-AFX) – The euro fell on Thursday after the European Central Bank (ECB) cut key interest rates. The European common currency last cost 1.0470 US dollars. In the morning it was still trading above the $1.05 mark. The ECB set the reference rate at 1.0491 (Wednesday: 1.0507) dollars. The dollar therefore cost 0.9531 (0.9517) euros.
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The ECB has with the fourth Interest rate cut this year responded to growing concerns about the economy in the euro area. As expected, the deposit rate, which sets the trend for the financial market, was reduced by 0.25 percentage points to 3.0 percent. Economists expect further key interest rate cuts. Finally, the ECB lowered its forecasts for economic growth and inflation. However, the uncertainty is high. For example, it is still unclear how the tariff policy of the future US government will affect the Eurozone will impact.
“That wasn’t the last step downwards,” commented Ulrich Kater, chief economist at Dekabank. “The economic pessimists now have a lot of weight in the ECB Council.” Kater welcomes the fact that the ECB is proceeding cautiously. “Apart from the remaining uncertainties regarding price developments, there would have been a great danger that, given the quarrels over the French state budget, a sharp interest rate cut could be interpreted as a gift to financial policy.”
Meanwhile, the Swiss franc has come under pressure alongside all currencies. The Swiss National Bank (SNB) has surprisingly significantly reduced its key interest rate. It was reduced by 0.50 percentage points, while economists had expected only 0.25 percentage points.
“The new SNB boss Martin Schlegel is setting an exclamation mark at the beginning of his term in office with the courageous interest rate cut of 50 basis points,” writes Katja Müller, economist at Landesbank Baden-Württemberg (LBBW). “The low inflation combined with the subdued economic development and the strong Swiss franc leave scope for a further reduction in the key interest rate.” Müller expects another reduction in March, but then only by 0.25 percentage points.
After the decision, the euro temporarily rose to 0.9344 francs. It had previously traded below 0.93 francs. Recently, however, the euro gave back some of its gains.
For other important currencies, the ECB set the reference rates for one euro at 0.82428 (0.82458) British pounds, 159.60 (160.35) Japanese yen and 0.9319 (0.9280) Swiss francs. A troy ounce of gold cost $2,677 in London in the afternoon. That was $41 less than the day before./jsl/nas