ECB Leaves Rates Unchanged at 1.00%

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At 7:45 a.m. ET, the European Central Bank announced its interest rate decision, which was left unchanged at 1.00%, in-line with estimates. The statement from the
ECB's website
, "At today's meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively." After the ECB's decision to leave interest rates unchanged, we saw little action in the EUR/USD currency pair. Soon after, however, the euro fell sharply versus the dollar until ECB's President Mario Draghi press conference began at 8:30 a.m. In his press conference, Draghi stated that they are seeing the economy beginning to stabilize, and believes that inflation will likely stay above 2% for the coming months, before falling. From the press statement, "Based on its regular economic and monetary analyses, the Governing Council decided today to keep the key ECB interest rates unchanged, following the 25 basis point decreases on 3 November and 8 December 2011. The information that has become available since early December broadly confirms our previous assessment. Inflation is likely to stay above 2% for several months to come, before declining to below 2%. At the same time, the underlying pace of monetary expansion remains moderate. As expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels." Shortly after the presser started, the euro began to move higher against the US dollar as Draghi continued to summarize the conditions in the Euro Zone. However, his statements did not seem to calm investors fears, rather the spike higher in the EUR/USD was more from a dive in the US dollar after weak economic data in the United States mainly in retail sales and jobless claims data. Also proving that point, the euro did not rise against the Swiss franc in the same manner as it did against the US dollar. The press statement continued to say, "The economic outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy-relevant horizon. Overall, it is essential for monetary policy to maintain price stability over the medium term, thereby ensuring a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area. A very thorough analysis of all incoming data and developments over the period ahead is warranted." Within the last few minutes, the EUR/USD broke above the 1.2800 level for a short time, and is currently testing that area, up about 0.88% on Thursday's trading session. Follow me on Twitter
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Posted In: NewsFuturesMovers & ShakersForexGlobalEconomicsMarketsGeneralecbEUREuropean Central Bankusd
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