Euro Drops EUR/GBP, EUR/USD, As Negative Rates Discussed

Published: 20 Nov at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, Canadian Dollar, Australia, USA, Canada, Germany,

While the prospect of encouraging services/manufacturing output reports for Germany and the Eurozone have shored up the Euro for much of the local session, the common currency posted widespread declines as industry experts intimated that the European Central Bank may deploy negative interest rates.

While ECB Board Member Joerg Asmussen presented a rather cautious stance on the option of implementing negative rates, the unnamed sources claim that the ECB is willing to run the risk if the Eurozone’s economic recovery continues to struggle.

According to currency strategist Eric Viloria; ‘Taking the deposit rate negative will have negative implications on the Euro. If banks have to pay money in order to park cash with the ECB it’s going to make them reluctant to do so, and make investors reluctant to hold Euros.’

The common currency consequently tumbled against the Pound and Yen.

The EUR/GBP pairing had softened earlier into the European session as the minutes from the Bank of England’s latest policy meeting indicated that the UK’s economic recovery continued to gather momentum.

The Euro is currently trading against the Pound in the region of 0.8334 and against the US Dollar in the region of 1.3469.

Declines against the US Dollar were limited as the appeal of the North American asset was dampened by the news that US consumer prices dropped for the first time in six months.

This result makes it increasingly unlikely that the Federal Reserve will opt to taper stimulus in the near future and makes higher-risk currencies more attractive.

In other currency news, the Australian Dollar softened after the International Monetary Fund declared that the currency was 10 per cent overvalued while the Canadian Dollar broadly strengthened on the prospect of continued extensive bond buying in the US.
As of Wednesday, 20th November 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1985, GBP USD exchange rate was 1.6099, GBP AUD exchange rate was 1.7258, and GBP CAD exchange rate was 1.6834.

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