Pound Euro exchange rate: GBP/EUR slumps as European Central Bank announces fresh stimulus package

The decision appears to have been spurred by the prolonged trade dispute between the U.S. and China.

The letter included a translation into English of a motion passed by Dutch parliament that says offering banks "tiered", or preferentially high, interest rates on deposits held at the ECB would be unfair to pension funds that are now forced to invest at negative rates.

The ECB also eased the terms of its long term loans to banks and introduced a tiered deposit rate to help banks.

The president tweeted: "European Central Bank, acting quickly, Cuts Rates 10 Basis Points".

Looking ahead, any further Brexit developments and United Kingdom political fallout are certain to cause movement in the pound euro exchange rate.

Unveiling the stimulus package to avert a deeper slowdown, Draghi said: "The package is quite powerful, both in the short term but also in the long run".

"The Governing Council now expects the key European Central Bank interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics", the European Central Bank said in its statement.

Eurozone inflation remains well below its 2% target.

Altium Wealth Portfolio Manager Michael Lee on the implications of an European Central Bank rate cut.

On the balance of things, it is a dovish decision but I reckon the move lower in the euro could also be in part tied back to markets not having confidence that this is enough to bolster economic confidence and/or inflation expectations. And the Fed sits, and sits, and sits.

Draghi said that eurozone countries with solid public finances should increase their spending to reboot economic growth, after years of monetary policy support from the central bank.

He said the governing council had been unanimous in its view that governments should provide greater support, adding: "Now it's high time I think for the fiscal policy to take charge".



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