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Euro Fell After EBC Meeting - 7.12.2012

The two major events of the previous day were European Central Bank and Bank of England policy meetings. The currency market has not disappointed from the point of view of strong movements. At the end of the European trading session the euro started depreciating against the majors. Pair EURUSD lost more than 100 points and reaching 1.2950, while EURAUD lost 130 points and dropped to 1.2345. Despite the ECB decided to leave interest rates unchanged (0.75% for the main refinancing operations, see chart), relatively gloomy economic outlook for 2013 from the central bank contributed to the currency’s depreciation. ECB Mario Draghi said the outlook had deteriorated from September, and the bank policy committee members had been discussing further interest rate cuts, which would technically push the deposit facility rate below zero.
ECB, main refinancing rate
The US dollar on the contrary appreciated against its peers. A considerable rally has been observed not only against the euro, but also against the British pound and the Swiss franc. The dollar index grew yesterday to a one-week high of 80.32 (see chart), supported by rumors about continuing discussions between US policy makers aimed at avoiding the “fiscal cliff”.
US dollar index, daily chart
Today investors will be closely watching labor statistics from the States and Canada – at 14:30 CET November employment data will be released. Investor worries are currently caused by expectations of a considerable drop in the number of US non-farm payrolls. In case such negative expectations come true, the Fed will have more pros to inject new money, weakening therefore the US dollar. The next FOMC meeting is on December 11-12.
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