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The ECB announced fresh coronavirus stimulus but held its deposit rate unchanged, which disappointed markets that had expected a cut. The euro fell to $1.1198 as investors rushed into dollars, and the dollar index rose 1.1% to 97.60 as cross-currency swap spreads widened.
A stronger dollar driven by a funding squeeze tends to pressure dollar-denominated commodity prices and widens the gap for non-US feed buyers facing a weaker local currency.
financialpost.comReutersMar 12, 2020
cnbc.comReutersMar 12, 2020After 2,356 past bullish macro events, US Dollar (Broad) moved a median +0.2% over 5 sessions (60% higher; middle half -0.3% to +0.7%), and +0.4% over 20.
After 533 past bearish macro events, Euro (USD per EUR) moved a median -0.3% over 5 sessions (33% higher; middle half -1.2% to +0.2%), and -0.5% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
Same-day ECB decision to hold the deposit rate (no cut) while the dollar surged on a dash for liquidity and wider swap spreads directly explains the euro's roughly 1.8% drop against the dollar.
On 12 March the ECB disappointed by holding its deposit rate while a dollar funding squeeze widened swap spreads, so the euro fell to $1.1198 at the start of the 5-day window.
The ECB's 12 March package disappointed markets and widening cross-currency swap spreads sparked a dollar rush, setting up the euro's weakness, though it falls several days before the 17 March move.
