The European Central Bank (ECB) has announced a cut to interest rates in a bid to increase economic growth across the struggling eurozone.
As well as a reduction in the benchmark rate from 0.25 per cent to 0.15 per cent, the ECB cut its deposit rate below zero, to -0.1 per cent. ECB president Mario Draghi is expected to announce a raft of measures designed to boost growth at a press conference later today (June 5th).
The eurozone has found the economic recovery to be a sluggish one and while major countries such as Germany have been able to pull away from the problems, it has been a difficult story in nations include Greece and Spain, where unemployment has rocketed.
On the back of the news of the rate cuts by the ECB, the euro hit a four-month low, falling 0.3 per cent for the day to $1.3563, reports the Financial Times. The FTSE Eurofirst 300 was up 0.6 per cent on at 1,381.90 following the announcement by the central bank.
"The market was already positioned for either a ten or 15 basis points cut so it’s not really the key decision – it will be much more important what Mr Draghi has to say about unconventional measures during the press conference later today," said Marco Valli, chief eurozone economist at UniCredit.
Speculation that the ECB would cut interest rates grew earlier in the week when new inflation data showed a fall from 0.7 per cent in April to just 0.5 per cent in May.
Earlier today, the Bank of England's Monetary Policy Committee announced it was holding the UK's base rate of interest at 0.5 per cent – a record low for the country – for another month.
Interest rates in the UK have been at this level since March 2010, shortly before the coalition government came to power, with many industry commentators predicting that a rate rise could occur in mid-2015.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.