Forex News – Euro jumps after ECB cuts rate by 25 basis points

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ecbThe European Central Bank cut its benchmark interest rate by 25 basis points as expected, bringing the rate to 1.00 percent from 1.25 percent.

EURUSD jumped 19 pips within seconds of the announcement at 12:45 GMT to 1.3399 from 1.3380, then continued to 1.3424 by 13:00 GMT.

The ECB has been under pressure to lower the key lending rate in the midst of a deepening euro zone debt crisis which outweighed the concern over persistently high inflation.

Apart from the benchmark lending rate, the central bank also reduced the interest rate on its deposit facility to 0.25 percent and the rate on the marginal lending facility to 1.75 percent, bringing all rates to match the lowest rates since 2009.

This is the second rate cut today in as many months, and the second rate reduction since new incoming ECB President Mario Draghi took over the central bank from  outgoing President Jean-Claude Trichet.

The focus now turns to the ECB Press Conference later today to look for any signal whether the ECB is preparing to cut rates even further in the coming months whether it  is going to increase its government bond buys.