On Friday, the European Central Bank (ECB) announced it had another idea. Thirdly, they reduced the federal funds rate by 25 basis points, something that many were expecting. This decision matches market expectations and comes as trading conditions thin out ahead of the Easter Holiday. With major markets closed across the globe, it’s led to a lower liquidity trading environment.
The ECB’s move today to lower rates came as a shooting duck visible only through infrared optics to almost all economists and traders. This executive action shows the bank’s seriousness about supporting increased economic development. It does so against a backdrop of persistent worries over inflation and economic growth in the Eurozone. The cut will affect a variety of financial instruments, but most prominently contracts for difference (CFDs). Particularly, 81.4% of retail investor accounts lose money when trading CFDs with this company.
While the market looks to find a new equilibrium with the ECB’s hawkish pivot, trading has all but dried up. As of Friday, the EUR/USD currency pair was still in a phase of consolidation. It remained well above the 1.1350 mark, indicating a firm yet timid optimism from the markets. Down to the GBP/USD pair, which oscillated within a narrow channel above 1.32700. In doing so, it’s on track to end the week on a high note.
The lackluster trading atmosphere is due in large part to the Easter Holiday. This creative celebration led to a drop in available buyers and sellers in the marketplace. This uncertainty was sufficient to scare many investors away. Consequently, most currency pairs were little changed with little price movement, or no price movement of significance.
Their commodities have had mercurial activity as well. Gold prices retraced from their all-time high of $3,357 hit at the start of Thursday. Regardless, they ended the week on a high note, climbing back up more than 2% and closing at $3,327. This shows continued robust demand for gold as a safe-haven asset during times of economic uncertainty.
The ECB’s cut in interest rates is an attempt to spur on economic growth. The opinions and beliefs expressed in this article are the authors’ alone and do not necessarily reflect the official policy or position of FXStreet or any of its advertisers. Investors should do their own careful research and be highly suspicious of any such promises or offerings.