Euro bounces as Draghi keeps deposit rate cut minimal

The euro jumped to a two-week high and European shares turned lower on Thursday as investors, hoping for another bit of Mario Draghi magic, got the minimum cut in the European Central Bank's (ECB) deposit rate that they had been expecting.

The ECB cut its deposit rate by 0.1percentage points to -0.3%, charging banks more for parking cash with the central bank and said it would announce more easing measures at its 1330 GMT press conference.

The rate cut was not as much as some traders had been expecting and it came with some confusion thrown in for good measure.

 

Roughly 5 minutes before the decision was due the Financial Times inadvertently sent out a story saying rates had been left on hold and Reuters then sent conflicting headlines saying the central bank had both cut and held the deposit rate.
 

 

It spun markets. The euro jumped more than 1% against the dollar, rebounding sharply from a 7-1/2-month low hit hours previously. European stocks went from 0.4% higher and nudging 3-month highs to 0.4% lower.

Risk assets were already feeling bruised after the head of the Federal Reserve Janet Yellen said on Wednesday she was "looking forward" to hiking U.S. rates.

"The markets had already been pricing in a deposit rate cut, and some investors had actually been looking for a bigger cut - maybe of 15 to 20 basis points," Hantec Markets' analyst Richard Perry said.