Breaking: ECB slashes rates by only 0.1% but announces QE, EUR/USD leaps, then crashes

The European Central Bank has lowered its deposit rate by 10 basis points from -0.40% to -0.50%

However, the ECB announced that it will restart its QE program from November 1, buying 20 billion euros per month with no time limit. The ECB will stop purchases before raising rates.

Guidance has changed and is now open-ended:

The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2%

EUR/USD jumped to 1.1070 before crashing below to a new low of 1.0961. Support awaits at 1.0926 and 1.09. Resistance awaits at 1.10 and 1.1030.

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The European Central Bank was expected to cut the interest rate by 10 basis points from -0.40% to -0.50% and also extend its commitment to maintaining low-interest rates for longer. However, some had expected a more aggressive rate cut and an announcement of a new bond-buying scheme – QE. Officials at the bank have recently expressed contradicting views about the scope for new stimulus. 

The economic situation in the euro-zone has been deteriorating in the past few months, with signs of an imminent recession. Moreover, inflation – which is the ECB's mandate – has remained depressed with core prices rising by less than 1% YoY.

EUR/USD has been trading above 1.10 ahead of the all-important decision and the press conference by ECB President Mario Draghi.