The euro has strengthened in recent months, as the eurozone’s economy improves and markets predict the European Central Bank could start to cut back the money-printing program it has been running to repair the ravages of the eurozone crisis and credit crunch of the late 2000s.
The dollar was also undermined by August 25 annual meeting of central bankers at the Jackson Hole resort in Wyoming at which Federal Reserve chief Janet Yellen’s speech gave no hint that the central back was planning any policy change that would support the dollar.
At the same event, European Central Bank President Mario Draghi did nothing to talk down the euro.
Euro strength has left the pound at its weakest for almost a year. It buys 1.0759 euros in the wholesale currency markets, making a euro worth a much as 92.95p.
Sterling buys $1.2955 currently.
Tourist rates tend to be below those of the markets, sometimes by quite a bit.
Some 350 people arrested and dozens injured as anti-austerity demonstrators clashed with police in Frankfurt, Germany.
Police cars were set alight and stones were thrown in a protest against the opening of a new base for the European Central Bank (ECB).
Violence broke out close to Frankfurt’s Alte Oper concert hall hours before the ECB building’s official opening.
Thousands of “Blockupy” activists were due to take part in a rally.
Organizers were bringing a left-wing alliance of protesters from across Germany and the rest of Europe to voice their anger at the ECB’s role in austerity measures in EU member states, most recently Greece.
The ECB, in charge of managing the euro, is also responsible for framing eurozone policy and, along with the IMF and European Commission, has set conditions for bailouts in Ireland, Greece, Portugal and Cyprus.
Police set up a cordon of barbed wire outside the bank’s new 600ft double-tower skyscraper, next to the River Main.
But hopes of a peaceful rally were dashed as clashes began early on Wednesday, March 18.
Tires and trash bins were set alight and police responded with water cannon as firefighters complained they were unable to get to the fires to put them out. One fire engine appeared to have had its windscreen broken.
Activists said many protesters had been hurt by police batons, water cannon and by pepper spray.
Police said as many as 80 of their officers had been affected by pepper spray or an acidic liquid. Eight suffered injuries from stone-throwing protesters.
Police spokeswoman Claudia Rogalski spoke of an “aggressive atmosphere” and the Frankfurt force tweeted images of a police van being attacked. They were braced for further violence as increasing numbers of activists arrived for the rally.
Blockupy accused police of using kettling tactics to cordon off hundreds of protesters and appealed for supporters to press for their release.
As the number of protesters grew in the streets away from the new ECB building, the bank’s president, Mario Draghi, gave a speech marking its inauguration.
The new headquarters, which had been due to open years earlier, cost an estimated €1.3 billion ($1.4 billion) to build and is the new home for thousands of central bankers.
Blockupy activists said on their website that there was nothing to celebrate about the politics of austerity and increasing poverty.
The European Central Bank (ECB) has agreed to raise the emergency funding available to Greek banks to €68.3 billion.
The €3.3 billion increase in the so-called Emergency Liquidity Assistance (ELA) is critical for Greece’s banks.
Depositors have been taking savings out of the country, depleting the banks’ access to cash to lend.
However, the Greek central bank is said to have requested an additional €10 billion of emergency funding.
The ECB had already raised the amount available to Greek banks by €5 billion to about €65 billion last week.
The deal will give Athens breathing space to negotiate a loan deal with its European creditors.
Greece is asking the eurozone for a six-month extension of its European loan, a Greek government official said on February 18. It would not be a renewal of the current bailout agreement, which includes strict austerity measures.
On February 16, Greece rejected a plan to extend its €240 billion bailout, describing it as “absurd”.
Greece is likely to run out of money if a deal is not reached before the end of February.
“We should extend the credit program by a few months to have enough stability so that we can negotiate a new agreement between Greece and Europe,” Greek Finance Minister Yanis Varoufakis told Germany’s ZDF.
Government spokesman Gabriel Sakellaridis confirmed that meant Yanis Varoufakis would be asking for a six-month extension to Greece’s current loan.
Gabriel Sakellaridis told Greece’s Antenna TV: “Let’s wait today for the request for an extension of the loan contract to be submitted by finance minister Varoufakis.
“All along deliberations are going on to find common ground, we want to believe that we are on a good path. We are coming to the table to find a solution.”
He added the Greek government would not back down on issues that it considered non-negotiable.
German Finance Minister Wolfgang Schaeuble dismissed the Greek proposal, telling broadcaster ZDF on February 17: “It’s not about extending a credit program but about whether this bailout program will be fulfilled, yes or no.”
An impasse over the selection of a new president triggered an early election last month that swept Syriza into government.
The Greek stock exchange rose 3% on Wednesday in morning trading in Athens as news of the loan extension application emerged, but later closed up just 1.1%.
The eurozone has given Greece until February 20 to decide if it wants to continue with the current bailout deal.
Greece wants to replace the bailout with a new loan that it says would give it time to find a permanent solution to the debt crisis.
On February 17, Greek PM Alexis Tsipras called for a vote in the Greek parliament on whether to scrap the austerity program on February 20, the same day as the eurozone deadline.
“We will not succumb to psychological blackmail,” Alexis Tsipras told parliament.
“We are not in a hurry and we will not compromise.”
JP Morgan claimed over the weekend that €2 billion worth of deposits was flowing out of Greek banks each week. It estimated that if that were to remain the case, they would run out of cash to use as collateral against new loans within 14 weeks.
The bank’s estimate is based on a calculation that a maximum of €108 billion of deposits is left in Greek banks.
The most up-to-date figures from the Greek central bank show deposits dropped 2.4% month-on-month in December to €160.3 billion from €164.3 billion, marking the third consecutive monthly fall.
Dutch Finance Minister Jeroen Dijsselbloem, who is also chairing the Eurogroup meetings of eurozone finance ministers, warned on Monday night there were just days left for talks.
Jeroen Dijsselbloem said it was now “up to Greece” to decide if it wanted more funding or not.
Greece has proposed a new bailout program that involves a bridging loan to keep the country going for six months and help it repay €7 billion of maturing bonds.
The second part of the plan would see Greece’s debt refinanced. Part of this might be through “GDP bonds” – bonds carrying an interest rate linked to economic growth.
Greece also wants to see a reduction in the primary surplus target – the surplus the government must generate (excluding interest payments on debt) – from 3% to 1.49% of GDP.
In Greece last week, two opinion polls indicated that 79% of Greeks supported the government’s policies, and 74% believed its negotiating strategy would succeed.
The European Central Bank (ECB) has unveiled an €1.1 trillion ($1.3 trillion) plan to boost eurozone economy.
The ECB will buy bonds worth €60 billion ($72 billion) per month until the end of September 2016 and possibly longer, in what is known as quantitative easing (QE).
The bank has also said eurozone interest rates are being held at the record low of 0.05%, where they have been since September 2014.
ECB president Mario Draghi said the program would begin in March.
The eurozone is flagging and the ECB is seeking ways to stimulate spending.
Earlier this month, figures showed the eurozone was suffering deflation, creating the danger that growth would stall as businesses and consumers shut their wallets, as they waited for prices to fall.
Mario Draghi said the program would be conducted “until we see a sustained adjustment in the path of inflation”, which the ECB has pledged to maintain at close to 2%.
He told a news conference the ECB would be purchasing euro-denominated investment grade securities issued by euro-area governments and agencies and European institutions.
However, “some additional eligibility criteria” would be applied in the case of countries under an EU and International Monetary Fund (IMF) adjustment program.
The value of the euro fell following Mario Draghi’s announcement, falling by more than a cent against the US dollar to $1.1472.
Lowering the cost of borrowing should encourage banks to lend and eurozone businesses and consumers to spend more.
It is a strategy that appears to have worked in the US, which undertook a huge program of QE between 2008 and 2014.
The UK and Japan have also had sizeable bond-buying programs.
Mario Draghi said the ECB’s own program had been taken “to counter two unfavorable developments”.
“Inflation dynamics have continued to be weaker than expected,” he said, with most inflation indicators at or close to historical lows.
“Economic slack in the euro area remains sizeable and money and credit developments continue to be subdued,” he added.
At the same time, it was necessary to “address heightened risks of too prolonged a period of low inflation”.
Mario Draghi said there had been a “large majority” on the ECB’s governing council in favor of triggering the bond-buying program now – “so large that we did not need to take a vote”.
Up until now, the ECB has resisted QE, although Mario Draghi reassured markets in July 2012 by saying he would be prepared to do whatever it took to maintain financial stability in the eurozone, nicknamed his “big bazooka” speech.
Since then, the case for quantitative easing has been growing.
In advance of the ECB’s announcement, there had been speculation that the central bank would not actually buy any bonds itself, but would invite the central banks of eurozone member governments to do so.
In the event, Mario Draghi said only 20% of the new asset purchases would require national central banks to shoulder risks outside their own borders.
The Swiss franc has risen by 30% in chaotic trade after the central bank abandoned the cap on the currency’s value against the euro.
The Swiss National Bank (SNB) said the cap, introduced in September 2011, was no longer justified.
It also cut a key interest rate from -0.25% to -0.75%, raising the amount investors pay to hold Swiss deposits.
The IMF’s head, Christine Lagarde, called the move “a bit of a surprise”.
Christine Lagarde said she was also surprised that the governor of the Swiss National Bank had not contacted her, and said she hoped he had communicated the plan to his fellow central bank governors.
Following the SNB move the euro went from buying 1.20 francs to buying just 0.8052, but it later recovered to buy 1.04.
Swiss shares closed down 9% and stock markets around Europe fell with investors buying “safe haven” assets such as gold and German bonds.
Many investors believe that with the franc so strong Swiss companies will struggle to maintain export levels.
Watchmaker Swatch saw its share price slump 15%. Swatch chief executive Nick Hayek called the decision “a tsunami” for Switzerland’s economy.
Mark Haefele, chief investment officer of Swiss bank UBS, estimated that the move would cost Swiss exporters close to 5 billion Swiss francs, equivalent to 0.7% of Swiss economic output.
One trader described trading after the unexpected announcement as “carnage”.
While the Swiss franc was held at 1.20 to the euro it had tracked the euro’s fall against the dollar.
Many believe the euro will fall even further if the European Central Bank (ECB) starts quantitative easing, buying bonds to push cash into the eurozone banking system to stimulate a recovery.
Keeping the franc at 1.20 to the euro had became increasingly expensive for the SNB as it sold its own currency and bought up euros, sterling, US and Canadian dollars and yen, usually in the form of government bonds.
SNB foreign currency reserves have more than doubled since the cap was started in 2011 making it one of the five largest holders of foreign reserves in the world.
The European Central Bank (ECB) has cut its benchmark interest rate by 10 basis points to 0.05%, and introduced new stimulus measures.
The ECB had earlier cut its rate from 0.25% to 0.15% in June, and also became the first major central bank to introduce negative interest rates.
It will also launch an asset purchase program, which will buy debt products from banks.
It is hoped this move will add liquidity to the financial system and revive lending.
The move falls short of a program of buying government bonds – a process known as quantitative easing (QE), and one which the US Federal Reserve has undertaken.
ECB chief Mario Draghi said that QE had been discussed by the bank.
“Some of our governing council members were in favour of doing more than I’ve just presented, and some were in favor of doing less,” he said.
“So our proposal strikes the mid-road…. a broad asset purchase program was discussed, and some governors made clear that they would like to do more.”
The ECB has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.
The ECB has cut its key interest rate to lowest ever level
Referring to one element of the new stimulus program, the purchase of asset-backed securities (ABS), Mario Draghi said: “The Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities with underlying assets consisting of claims against the euro area non-financial private sector under an ABS purchase program.
“This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter.”
Mario Draghi also gave an update on the ECB’s forecasts for the eurozone economy.
The new predictions warned of slower growth, of 0.9% in 2014, and of 1.6% in 2015.
Meanwhile the forecast for inflation was cut to 0.6% rising to 1.1% in 2015, and well short of the ECB’s target of close to, but below, 2.0%.
After the latest news was announced the euro fell to $1.2996, the lowest since July 2013 and the first time it has fallen below $1.30 since then.
As was the case after the ECB’s last rate cut in June, Mario Draghi again said that cuts had reached “the lower bound”.
The main benchmark refinancing rate determines what banks pay the ECB for credit, and affects what banks charge companies to borrow.
The central bank also cut its deposit rate, what banks pay to keep their money at the central bank, to minus 0.2% from minus 0.1%.
It is hoped that this measure will encourage banks to lend to business, rather than sit on their cash.