Euro to US Dollar tumbles to 11-1/2 year low as ECB announces QE start date

March 5, 2015 - Written by James Fuller

STORY LINK Euro to US Dollar tumbles to 11-1/2 year low as ECB announces QE start date

The Euro to US Dollar exchange rate tumbled sharply to a new 11-1/2 year low after the European Central Bank said that it will begin its quantitative easing programme on March 9 and aim to keep it going until September 2016, and if necessary beyond that. Draghi said that the central bank would begin to buy sovereign bonds next week under its quantitative easing programme, which could amount to €1.1 trillion. On a monthly basis, the bank will buy €60 billion worth of bonds per month. The currency weakened sharply as Draghi added that the programme would continue until inflation begins to rise to the ECB target of just under 2%.

‘We will on 9 March 2015 start purchasing Euro-dominated public sector securities in the secondary market. We will also continue to purchase asset-backed securities and covered bonds, which we started last year. The latest economic data and, particularly, survey evidence up to February point to some further improvements in economic activity at the beginning of this year. Looking ahead, we expect the economic recovery to broaden and strengthen gradually,’ said Draghi in the press conference that followed the rate decision in which policy makers left rates at 0.05%.

The ECB also revised its growth forecasts for the remainder of 2015 and next year. The bank now expects the Eurozone economy to expand by 1.5% in 2015, up from the previous forecast for a rise of 1%. Draghi also said that the bank now expects the region’s economy to expand by 2.1% by 2017.

Despite the improving economic outlook for the Eurozone, investors were jittery as the ECB governor said that Greece could not rely on the ECB to raise the limits on Athens issuance of debt and the rules meant that the ECB could not buy Greek bonds under its new asset-buying programme.

The US Dollar advanced as markets widely shrugged off data, which showed that the number of Americans filing for unemployment benefits increased unexpectedly last week. According to the Washington based Department of Labour, the number of individuals making initial benefit claims increased by 7,000 to 320,000. Economists had been forecasting for the figure to fall by 18,000 to 295,000. US productivity was also shown to have fallen by 2.2% in the final quarter of 2014 as large swathes of the US were hit by harsh winter weather.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Currency Predictions Daily Curre Forecasts