The main currency pair extends weakness into a second day today as markets continue to weigh the latest more dovish ECB accounts/ minutes in light of Fed Yellen’s less dovish comments delivered after the Wall Street close.
The minutes from the ECB’s March policy meeting, released on Thursday morning, showed a broadly united Governing Council, which appeared to be supportive of the decisions made by President Mario Draghi. At the closely-watched meeting last month, the ECB lowered its deposit rate deeper into negative territory by reducing it by 0.1 to Minus-0.4%. The Governing Council also cut the marginal lending rate by 0.05 to 0.25% and the refinance rate by 0.05% to zero. At the same time, the central bank increased the size of monthly purchases with its bond-buying program by €20 billion to €80 billion a month and extended the program by several months through March, 2017.
The monetary policy divergence between both the Fed and ECB became more pronounced after the ECB minutes revealed that the governing council discussed steeper rate cut at its March meeting, while at today’s speech, Yellen reiterated that, “Economy is on path for further rate increases” and “US on solid course, not a bubble economy.”
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, reached an intraday high of 94.67 on Thursday, before falling back to 94.50 (up 0.01%) at the close. The index remains near five-month lows.