The European Central Bank’s new chief Mario Draghi gestures during his first press conference at the ECB in Frankfurt/M., western Germany, on November 3, 2011. The European Central Bank’s decision to cut its key interest rates in a surprise move was “unanimous”, the 64-year-old Italian said. Draghi’s first few days as ECB president have certainly been a baptism of fire. The 17-nation eurozone is back in deep crisis following the shock call by Greece for a national referendum on a debt rescue reached with huge difficulty only last week. Draghi took over at the helm of the ECB from Jean-Claude Trichet.
The euro is trying to recover early Friday in Europe from the battering it took on Thursday after the European Central Bank cut its growth forecasts and failed to convince markets with its plan for stabilizing the Eurozone economy.
Analysts said although the ECB had tried to get ‘ahead of the game’ with its announcement, it had only drawn attention to the lack of progress in the region at addressing its institutional and structural flaws.
“Headwinds for the euro zone remain the same as before, and per se will continue to ensure that as long as euro area governments continue to ‘under deliver’ on reforms and in broader policy terms, the impact of ECB policy measures will continue to be heavily muted,” said Marc Ostwald, a strategist with ADM ISI in London, in a note to clients.
At 02:45 AM ET (07:45 GMT), the euro was at $1.1206, up around 0.3 cents from the two-year low it hit after ECB President Mario Draghi’s press conference. It had hit a low of $1.1175 overnight, its lowest against the dollar in nearly two years.
The euro was also lower against sterling, despite a flurry of negative headlines around Brexit, which generally tend to affect the British pound more than the single currency.
The dollar index, which measures the greenback against a basket of major currencies, was at 97.428, down a touch from an overnight high of 97.595, which was its highest since May 2017.
The ECB’s forecast validated market fears of a global economic slowdown, and they were further reinforced by data overnight showing a sharp drop in Chinese exports in January.
Markets will look to the monthly U.S. payrolls report, due at 08:30 AM ET, for reassurance that all three of the world’s biggest economic blocs aren’t stagnating at the same time. Before that, there will be January data on industrial production from three of the biggest four Eurozone economies – France, Italy and Spain, while Germany will release manufacturing orders data for the same month.
