The European currency fell sharply against the US dollar on Thursday after the publication of the European Central Bank’s decision on interest rates.And if the level of interest rates was clear, it remained unchanged, then with the prospect of curtailing program of asset repurchase market participants still had to figure it out.
As seen from the reaction of risky assets that collapsed against the US dollar, the European regulator said that it will gradually approach the program of curtailing the bond repurchase program.
In the first half of the day, data emerged that indicated an increase in inflation in Germany compared with the same period in 2017.
According to the report of the Federal Bureau of statistics of Germany, the consumer price index in May this year increased by 2.2% compared to the same period last year. Let me remind you that in April the growth was 1.6%.
Unsurprisingly, the dynamics of energy prices contributed to the main growth. According to the report, energy prices in Germany in May this year increased by 5.1% compared to May of the previous year. The data fully coincided with the forecasts of economists. Prices for food products grew by 3.5%, and for services only by 1.9%.
The European Central Bank today left the key interest rate unchanged, at 0.0%, while the deposit rate remained unchanged, at its negative level of -0.4%.
The ECB said that they will continue to make net purchases under the asset repurchase program for 30 billion euros a month until the end of September this year, allowing market participants to understand that no one is going to depart from the planned course. After September, net purchases of assets will be reduced to €15 billion by the end of December 2018. In early 2019, it is planned to fully complete the asset repurchase program.
The ECB President said during the press conference that the Governing Council had made progress in achieving a steady inflation adjustment towards the target level of 2.0%. Draghi also noted that the growth of the eurozone economy began to gain momentum in the second quarter of this year, which indicates its stability after a slight slowdown in the 1st quarter. Problems for the economy, according to the president of the ECB, can cause the risk of weakening trade with the rest of the world.
Data on retail sales in the UK provided good support to the British pound in the first half of the day, however, the upward trend did not continue after the publication of the report from the ECB.
According to the National Bureau of Statistics, retail sales in the UK in May this year rose by 1.3% compared with April. The data exceeded the forecast of economists, who expected that in May sales will grow by 0.3%. A good retail sales volume will have a positive impact on the UK economic growth in the 2nd quarter of this year, which will allow the Bank of England to return to the topic of interest rate hikes.