On Thursday, December 3, the European Central Bank (ECB) held a monetary policy meeting and decided to keep the key rate at 0.05%. However, the deposit rate, which the ECB pays to credit institutions for their deposits, was lowered to -0.30%, which was in line with market expectations.
Now, banks will have to pay the ECB to hold money in deposits with the regulator. This move aims to stimulate the eurozone economy by encouraging financial institutions to redirect funds to other areas, as it has become more expensive to hold money with the ECB.
Amid the ECB’s decision on the rate, the EUR/USD pair rose to 1.069, which came as a surprise.
Experts from ForTrader note that they are waiting for Mario Draghi’s speech, the head of the ECB, which will start at 16:30 Moscow Time, with his comments on the ECB’s decision and the expansion of the QE program.
Discuss Forex trading on the forum
- Current situation, discussion, and forecasts for Forex (EURUSD, USDJPY, GBPUSD, USDCHF, AUDUSD, NZDUSD)
About the EUR/USD rate
- Mario Draghi’s speech: EUR/USD rose because markets did not expect such a twist with QE
- Yellen’s speech: Chair of the Fed strengthened the USD and confidence in a rate hike in December
- Nonfarm Payrolls on December 4: Can anything stop the dollar’s rise?
- Is it worth waiting for the EUR/USD parity?
FAQ
What is the ECB’s deposit rate?
The ECB’s deposit rate is the interest rate paid to commercial banks for holding excess reserves with the central bank.
Why did the ECB lower the deposit rate?
The ECB lowered the deposit rate to encourage banks to lend money rather than keep it with the central bank, aiming to stimulate economic activity.
How does the deposit rate affect the EUR/USD pair?
A lower deposit rate can weaken the euro against the US dollar, as it reduces the attractiveness of holding euros compared to dollars.
