ECB Rate Hike Verdict
• The ECB raised the deposit facility rate by 50 bps to 3%.
• Before the collapse of SVB and the fallout of Credit Suisse, markets were expecting a 50bps rate hike from the ECB.
• Bitcoin stands firm just below $25k.
Overview
The European Central Bank (ECB) has announced a verdict on its latest interest rate decision, raising the deposit facility rate by 50 bps to 3%. This was expected as markets had been predicting a 50bps hike before the collapse of SVB and the fallout of Credit Suisse. Despite this news, Bitcoin stands firm just below $25k.
Background
Before the collapse of SVB and the fallout of Credit Suisse, markets were expecting a 50bps rate hike from the ECB; however, moments before the decision, markets saw a 35% probability of a 50bps hike. In spite of this uncertainty surrounding its decision, it ultimately decided to raise rates by half a percentage point in order to stimulate economic growth.
Impact on Currencies
The Euro strengthened against both US Dollar and British Pound following the announcement with EUR/USD reaching 1.2047 and EUR/GBP at 0.8678 – both higher than pre-announcement levels. On top of this, Bitcoin also stood firm just below $25k despite this news showing that cryptocurrency is not always affected by traditional market trends such as central bank decisions like these ones.
Conclusion
The ECB’s decision to raise its interest rates reflects growing confidence in economic recovery following recent market turmoil while also providing stimulus for further growth in Europe’s economy. As expected, currencies have reacted positively to this news but it appears that cryptocurrencies have remained largely unaffected although time will tell if there are any longer term impacts from this decision on cryptocurrencies or other asset classes going forward.