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Euro drops following more easing from BoE, ECB and PBoC

Euro drops following more easing from BoE, ECB and PBoC

In the space of less than an hour yesterday three central banks took action to stimulate their economies, although suggestions of coordinated action were played down. First out of the blocks was the Bank of England who kept rates on hold and voted in favour of an additional £50bn of quantitative easing. This came after a recent raft of weak data with heightened concerns around the eurozone debt crisis. This is the third round of monetary stimulus and is in addition to recently announced credit easing measures.

The ECB then cut interest rates by 0.25% to a record low of 0.75% and reduced the rate paid on overnight deposits to zero. This was in line with market expectations and followed a poor batch of data releases which revealed even the powerhouse of the region, Germany, is experiencing a downturn. EUR/GBP has dropped significantly following the announcement. Of the three, the surprise move was from the People’s Bank of China which cut its benchmark interest rate shortly after for the second time in a month, upping their efforts to stifle the slowdown in its economy.

Across the Atlantic, according to ADP, US private employers added 176k new workers to their payrolls in June while the number of initial claims for unemployment benefit fell by 14k. Investors are now looking for confirmation of good jobs data and solid figures today should limit chances of QE3.

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