LONDON, June 5 The euro fell to a four-month low
and German Bund futures rallied on Thursday after the European
Central Bank cut interest rates and said further policy measures
would be announced later in the day.
The ECB's initial announcement of a cut in its interest
rates, including bringing its deposit rate below zero for the
first time, triggered volatile market trading before the bank
said in a statement more action would be forthcoming.
ECB President Mario Draghi is due to hold a news conference
at 1230 GMT.
The rate cuts were widely expected and many were also
looking for the ECB to offer banks long-term loans linked to
"His (Draghi's) decision on the interest rates was as
expected. The key thing now will be to see what extra measures
he comes up with. I don't see any QE in terms of the purchasing
of public debt. I do think he may come up with measures for ABS
or an LTRO," said Francois Savary, chief investment officer at
Swiss bank Reyl.
The euro traded down a third of a percent at $1.3666
after the announcement of the further measures.
Bund futures hit a high for the day of 146.39, up
as much as 46 ticks. Euribor short-term interest rate futures
<0#FEI:> rose 0.5-4 ticks from levels seen before the decision,
pushing implied rates down.
The euro zone's Euro STOXX 50 share index
extended gains to trade 0.8 percent higher on the day, hitting
its highest level since September 2008 at 3,266.21 points.
British government bond futures rallied to a
session high, and 10-year gilt yields fell, narrowing their
spread over Bunds by 2 basis points after the decision to just
below 122 basis points, their lowest since June 2.
The Bank of England earlier left interest rates unchanged.
(Reporting by Patrick Graham, Eemelia Sithole-Matarise, John
Geddie, David Milliken, Atul Prakash and Sudip Kar-Gupta)