An apparent split within the European Central Bank and a surging Wall Street conspired this morning to drag down the euro. By 11:00 AM, the euro fell from yesterday’s close of $1.3255 to $1.3204 and appeared primed to head even lower by the end of the day.
The euro sell-off gathered steam shortly after European Central Bank council member Ewald Nowotny suggested that he did not personally support cutting the benchmark rate below 1 percent but it still remained a point “open for discussionâ€. Meanwhile, the Dow gained nearly 200 points mid-way through the morning session fueled by news that Wells Fargo & Co. – the second-largest U.S. mortgage lender – had earned $3 billion in the first quarter far surpassing estimates. This news spurred a resurgence in bank stocks that have single-handedly propelled markets into positive territory after several days of losses.
Nowotny’s comments appear to confirm that the ECB has yet to arrive at a decision on how to best proceed even as signs point to worsening conditions within the eurozone. Last week’s interest rate cut of just 0.25 percent was universally panned by critics expecting at least half a point reduction and the criticism seems justified with retail sales for the month of March down a full 4 percent. Unemployment within the eurozone is at a three-year high with some 13.5 million people – or 8.5 percent of the population – currently looking for work.
Finally, Nowotny also appeared to pour cold water on the Bank’s promised efforts to introduce expanded quantitative easing to help introduce more money into the economy. Describing the purchase of commercial paper and corporate bonds as a “sensible and efficient measure†to ease credit concerns, Nowotny then noted that it would take some time to implement such a program and he could not offer a realistic time frame for the start of a dedicated re-purchase program.
