Forex News – ECB keeps rate at 1 percent

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ECBThe European Central Bank held its monthly policy meeting today and announced it kept its benchmark interest rate  at a record low of 1 percent , which was in line with expectations.

ECB President Mario Draghi told a news conference  that  “Downside risks to the economic outlook prevail”.

His comments pushed the euro lower against the dollar, falling to a three-week low.

Also weighing on the currency today, a series of grim economic indicators and renewed concerns about the public finances in Spain have fuelled concerns that the euro zone is technically in a recession and that the sovereign debt crisis may flare up again.  Spain is the euro zone’s fourth-largest economy and is heavily indebted.

The Spanish government is trying hard to convince European partners and debt markets it can reduce its budget deficit in the face of growing complaints from the public.

Latest euro zone economic data show the region’s economic recovery is stumbling again. Today, soft retail sales and services PMI numbers give evidence of the region going into a mild recession.

The ECB is not about to tighten policy any time soon. It had to reverse two rate rises last year as the crisis came back and so the central bank will be careful not to repeat the mistake of abandoning its low-rate policy too soon.