Forex News – ECB leaves rates unchanged, expected to launch new bond purchase program

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Forex News: Euro rises against Dollar in early Asian sessionEuro dropped immediately after the European Central Bank announces rates were kept unchanged at 1.5 percent.

Some were hoping for a rate cut of at least 25 basis points but instead the central banks decided to restart the covered bond purchase programme as well as liquidity operations.

The ECB is expected to launch a fresh programme to buy covered bonds in an effort to prop up banks and prevent them from crashing due to the sovereign debt crisis and growing tension in the interbank market.

The ECB first bought covered bonds between 2009 and 2010 in a year-long, 60 billion euro programme.

Outgoing ECB President, Jean-Claude Trichet will later give a press conference where he is expected to give a hint on whether the ECB is preparing to cut rates next month or in December. Market players will also keep a close eye on the ECB’s assessment of the current situation and whether it still sees the monetary policy stance as “accommodative”.

Italian central bank governor Mario Draghi takes over from Trichet at the end of this month.