Danish central bank expected to mirror ECB and cut key rate

Euro Price Chart Sinks Ahead of September ECB Meeting

Euro Price Chart Sinks Ahead of September ECB Meeting

The European Central Bank (ECB) has launched a new round of monetary stimulus to give the economy a boost in the face of global uncertainties like the US-China trade conflict and Brexit.

Analysts at Nordea and Jyske Bank both predict a smaller 10 basis point cut to the Danish deposit rate on Thursday - to match the Swiss level - and a further 10 point reduction following ECB's next meeting in December.

The move marks the first time the deposit rate has changed since 2016, as Europe's economy has struggled amidst losses in demand both from Brexit and the trade war, while quantitative easing was last used in December of a year ago.

Danske Bank expects the central bank to cut the deposit rate by 10 basis points, but suggests it could then intervene in foreign exchange markets to steady the crown.

U.S. President Trump reacted negatively.

Interest rates were cut by 0.1% to their lowest ever level of -0.5%, and the bank will start purchasing €20 billion worth of bonds each month from November. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting USA exports. They get paid to borrow money, while we are paying interest!' he said.

Mr Draghi is due to make way for incoming ECB President Christine Lagarde on 1 November.

Economists polled by Reuters expected a 10 basis point deposit rate cut, a tiered deposit rate to support banks, bond buys of 30 billion euros a month from October and a fresh promise to keep rates low for longer.

Eurozone inflation remains well below its 2% target.

The euro lost three-quarters of a cent against the USA dollar after the European Central Bank announced the rate cut and revamp of QE, dropping to $1.0927.

He said today's announcement "is a reminder to everyone that we are only part way through the recovery following the financial crisis".

Eurozone growth slumped to 0.2% in the second quarter of 2019, from 0.4% in the first three months of the year, while some economies, including Italy and Germany, have come close to the brink of recession in recent months.

Unlike most central banks, Denmark's does not adjust rates to control inflation.

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