The ECB stuns markets with first interest rate hike in 11 years

The European Central Bank increased their interest rates for the first time in 11 years on Thursday in an effort to settle ongoing inflation in the euro spending countries. 19 nations share the euro currency, and all will be affected after the ECB pushed its benchmark rate up by 50 basis points, bringing their deposit rate to zero. Majority of trader sentiment predicted a hike by half of what was decided upon, making this a surprise for retail traders and hedge funds alike. “The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signaled at its previous meeting,” the ECB said in a statement Thursday. Analysts expect the Euro/Dollar (EURUSD) to reach parity again by the end of the trading week, expecting another leg down for the Euro causing the cross to likely go below parity. This is all happening in light of the crumbling Italian government as Prime Minister of Italy, Mario Draghi is set to retire after he dissolved parliament following the ECB decision. Italy is vastly responsible for the debt incurred by the EU during Draghi’s administration. This news, along with the interest rate hikes by the ECB should negatively affect the Euro in the coming weeks and months as they pave the way for their recovery. More to come on these topics and more as this is a developing story.

-J