Euro FALLS: Eurozone currency DROPS against US dollar and euro as ECB cuts growth forecast

Euro FALLS: Eurozone currency DROPS against US dollar and euro as ECB cuts growth forecast

European Central Bank President Mario Draghi slashed growth forecasts (Image: GETTY)

The euro dropped against the US dollar and pound this afternoon shortly after ECB President Mario Draghi revealed the central bank had trimmed its expectations for growth for this year and next. Euro area growth for 2018 was downgraded to 1.9 percent from the 2.0 percent forecast back in September. For 2019, Mr Draghi said growth in the euro area was slashed from 1.7 percent compared to 1.8 percent previously forecast. The demotion in growth forecasts caused the euro to fall as much as 0.3 percent against the US dollar to $1.1339.

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Against the pound, the euro dropped half a percent at 89.53 pence.

Mr Draghi addressed the bank’s policy meeting after the ECB confirmed it would end its quantitative easing scheme after previously announcing it would phase out the stimulus by the end of this year.

The €2.6trillion (£2.3million), four-year-long bond buying programme has seen the ECB top up eurozone cash supply by purchasing millions of euros worth of assets each month.

The amount of assets bought each month was reduced in September to €15billion from €30billion as the scheme began to wind down.

The risks surrounding the euro area growth outlook can still be assessed as broadly balanced

Mario Draghi, European Central Bank President

Interest rates were left unchanged as the ECB said it will reinvest funds from maturing bonds accumulated under the scheme for some time.

The ECB said in a statement: ”The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates.”

Speaking of the risk to expansion in the euro area, Mr Draghi said: “The risks surrounding the euro area growth outlook can still be assessed as broadly balanced.

“However, the balance of risk is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.”

However, the ECB chief maintained that global growth will continue but at the lower pace.

Mr Draghi said: “The expansion in global activity is still expected to continue, supporting euro area exports although at a slower pace.”

European Central Bank President Mario Draghi at the news conference (Image: EPA)

It was confirmed earlier this month that the eurozone economy expanded at its slowest pace in four years in the third quarter of 2018.

Euro area gross domestic product (GDP) grew by 0.2 percent between July and September of this year, marking a slowdown from 0.4 percent growth in the second quarter.

The data, released by Eurostat and confirming earlier estimates, means the eurozone economy grew at its slowest rate since the second quarter of 2014.

Earlier this month it was revealed eurozone factory orders tumbled for a second month.

New orders fell for a second month in the euro area as manufacturing activity in the currency bloc expanded at its weakest rate in more than two years in November with orders contracting for a second month.

The biggest influencer on the eurozone data is thought to be the trade war between the US and China, according to IHS Markit Purchasing Managers’ Indexes.


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