Source: BBC
European stock markets have fallen and the euro has soared following the economic stimulus measures announced by the European Central Bank.
After initially rising following the broader than expected package, Frankfurt closed down 2.3%, Paris ended 1.7% lower and the FTSE 100 slid 1.8%.
The euro initially fell 1.6% against the US dollar to $1.0822 before jumping as high as $1.1218.
It was one of the biggest one-day swings in the currency’s history.
Sharp rises for European banks were also largely wiped out.
The ECB cut its main interest rate from 0.05% to 0% and cut its bank deposit rate, from minus 0.3% to minus 0.4%.
The bank will also expand its quantitative easing programme from €60bn to €80bn a month.
Jasper Lawler, of CMC Markets, said: “Stocks came off highs of the day when some of the initial euphoria was nullified by the suggestion by ECB president Mario Draghi that rates would not be cut any further.”
Simon Derrick, chief currency strategist at BNY Mellon: “If the intention of the ECB board was to help weaken the euro then their work was entirely undone by Mr Draghi’s comments about the future path of rates.”
John Hardy, head of currency strategy at Saxo Bank, said: “This was a much bigger bazooka than the market was expecting and shows the ECB trying to get ahead of the confidence curve after learning its lesson in December.”
The stimulus measures announced three months ago have largely failed to drive economic growth higher or boost inflation.
Inflation alert
Mr Draghi told a news conference in Frankfurt that the bank had cut eurozone inflation projections to reflect the recent decline in oil prices.
The bank now expected inflation to be just 0.1% this year – substantially lower than the previous estimate of 1% and underlining the need for the ECB to go further than expected.
Inflation should rise to 1.3% in 2017 and 1.6% the following year, according to its estimates.
“We are not in deflation,” Mr Draghi stressed.
He also warned that risks to economic growth across the 19 countries that use the euro remained “tilted to the downside”.
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