ECB Rate held – input gratefully received!
The ECB held its interest rate at 1% today, Thursday 2nd July, following which the Euro fell, rallied slightly after the US jobless figures and then fell further (at one down 1% on the day) as the S & P fell through the day.
Sterling (GBP/USD) fell after the figures but then rallied through the afternoon.
When I was first taught about the markets, I was taught that the values of Forex are relative to each other, with the main (not only, but certainly the most important) criterion being the relative interest rate.
So, why did the Euro fall as much as it did today when Sterling didn’t? Are currencies at the moment really so concerned with the ‘flight to safety’ to the Dollar (is it any safer than any of the others?!) that they are ignoring this tenet? Were the banks just pushing the Euro down to its support of 1.4000 to see what would happen?
I’ll be grateful for any comments or views!