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ECB takes markets by surprise with fresh stimulus plan

The European Central Bank makes a monetary U-turn, joining other central banks' efforts to counter mounting global economic pressures.

ECB takes markets by surprise with fresh stimulus plan

The Euro plunged to a 21-month low overnight after the European Central Bank (ECB)  announced a new stimulus programme and downgraded its December 2018 growth forecast for 2019 of 1.7 per cent to 1.1 per cent. The single currency fell by more than 1 per cent to as low as 1.1177 against the Dollar.

ECB President Mario Draghi announced a new round of targeted longer-term refinancing operations (TLTRO) to counter slowing growth across the Eurozone. The new programme will offer European banks, particularly in Italy and Spain, discounted loans to encourage lending in the bloc. The ECB also revised down its interest rates guidance, with no further rises anticipated at least until 2020. The new stimulus comes just three months after ending quantitative easing.

Meanwhile, Prime Minister Theresa May has until the end of today, 8 March to request new concessions from the European Union on the Northern Irish backstop. With the next vote on her Brexit withdrawal agreement scheduled for 12 March, May has very little time to gain the support of MPs.

Today, the US will release non-farm payroll data, which is expected to show a slight slowdown in the booming US labour market, with only 180,000 jobs added in February compared to 304,000 in January. The latter might have been slightly inflated and the drop in the number of new jobs added may be a belated reaction from the longest-in-history government shutdown.

Investors will also pay close attention to the growth in wages, which is forecast to have improved slightly from 3.2 per cent previously to 3.3 per cent.

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