Euro holds gains after surging on European Central Bank move

It also cut a key interest rate wto 0.3 per cent and agreed to buy more assets with the proceeds of existing bond purchases.

Japan’s Nikkei 225 dropped 2.3 percent to 19,475.86 and South Korea’s Kospi lost 0.8 percent to 1,979.06.

REACTION: The ECB’s announcement caused the euro to jump 3 per cent against the dollar, a large move, to $1.0952. Also, the European banking stocks ING Groep (ING), Unicredit (UNCFF), and Deutsche Bank (DB) fell 2.1%, 2.3%, and 3.1%, respectively. The dollar index traded back above 98.300 early on this morning after a heavy sell-off yesterday which was largely driven by the knee-jerk rally in the euro.

“Furthering reducing the deposit rate is negative for banks as it puts more pressure on managing their margins”, bank analyst Nuria Alvarez from Renta 4 in Madrid said by phone.

His powers of persuading market sceptics were most famously demonstrated in 2012 when he promised to do “what it takes” to shield the euro, instantly quelling speculation that a debt crisis could bring about the collapse of the currency.

He added that the decision to expand the pool of assets available to buy local government debt only reinforces that perception but in reality was probably the only option available to policymakers if they wanted to stretch out the duration of the programme until March 2017 to the tune of €60bn a month.

On Friday, the main event will likely be the jobs report, which is one of the final big pieces of economic news the Federal Reserve will get before making what could be a historic decision on interest rates.

USA money market futures 0#FF: hardly budged after the European Central Bank, pricing in about a 75 percent chance of a rate hike this month and possibly two more rate hikes next year.

ECB EXPECTATIONS: Markets had been anticipating strong action from the European Central Bank in the run-up to its policy announcement Thursday.

Asian stocks finished in the red, with Tokyo down 2.2 percent, Shanghai shedding 1.7 percent and Sydney 1.5 percent lower.

Hence, a policy divergence between the ECB and the Fed emerges, with the European Central bank keeping up with the status quo and its American counterpart moving towards a tighter monetary policy amid an improving job market.

Oil prices rose Friday amid OPEC’s policy meeting in Vienna, where the cartel appears on course to maintain crude production levels despite a recent plunge to underneath $40 per barrel.