President Mario Draghi’s decision to bring the ECB’s deposit rate to a record low of minus 0.3 percent sent the euro higher Thursday.
At one point, the euro rose more than 3 percent against the dollar after Draghi announced a smaller decrease than many had expected, reducing the rate only 10 basis points.
The move brought to an end a currency war that had been going on between Eurozone members and other European countries such as Denmark and Switzerland which now face less pressure to devalue below their current currencies of minus 0.75 percent that both countries have had to maintain since the beginning of the year.
In Switzerland, the dramatic decline in the franc led to predictions that there is little need for further easing from the Swiss National Bank at this stage.
According to Markus Schmieder, an economist at Wellershoff & Partners Ltd in Zurich who commented by phone, “Although the SNB is still at the mercy of the ECB, there’s no immediate pressure to act.”
Global Reactions
The pan-European stock index of FTS Euro first 300 shed 3.3 percent, the biggest fall since Aug. 24 while on Wall Street, the S&P 500 had its biggest one-day percentage decline since Sept. 28, dropping 1.4 percent.
Asian markets slumped overnight in response to the ECB decision. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8 percent, extending losses for the week to 0.4 percent. Japan's Nikkei tumbled 1.9 percent, the biggest daily drop since Nov. 2, and China's CSI300 index slipped 0.9 percent, shrinking gains for the week to 4.6 percent.