EUR/USD plunges on ECB rate cut, U.S. growth data

EUR/USD plunges on ECB rate cut, U.S. growth data

Investing.com – The euro dropped against the dollar on Thursday after the European Central Bank cut interest rates and caught many off guard, while the dollar surged on data showing that the U.S. economy grew more than expected in the third quarter.

In U.S. trading on Thursday, EUR/USD was down 0.93% at 1.3388, up from a session low of 1.3298 and off from a high of 1.3529.

The pair was likely to find support at 1.3254, the low from Sept. 13, and resistance at 1.3548, Wednesday's high.

The ECB trimmed its benchmark interest rate to a record-low 0.25% from 0.5% in an unexpected decision.

The bank also cut its marginal lending rate to 0.75% from 1% and left its deposit facility rate unchanged at zero.�

ECB President Mario Draghi said euro zone borrowing costs will remain at present or even lower levels until the economy improves, adding that the euro zone may experience "a prolonged period of low inflation."

Meanwhile in the U.S. official data showed that the U.S. economy grew at an annual rate of 2.8% in the three months to September, far surpassing expectations for a 2.0% reading. The U.S. economy grew by 2.5% in the preceding quarter.

The robust data rekindled expectations that the Federal Reserve could announce plans to scale back its USD85 billion-a-month stimulus program as its next monthly meeting in December.

Stimulus programs aim to drive recovery by depressing borrowing costs, weakening the dollar in the process, and talk of their dismantling strengthens the currency.

Separately, the Department of Labor said the number of individuals filing for initial jobless benefits in the U.S. last week fell by 9,000 to a seasonally adjusted 336,000, largely in line with analysts' forecasts for a claims to fall by 10,000.

The euro, meanwhile, was down against the pound and down against the yen, with EUR/GBP trading down 0.93% at 0.8328 and EUR/JPY trading down 0.98% at 132.03.

On Friday, the University of Michigan is to release the preliminary reading of its consumer sentiment index, while the Labor Department will release its report on nonfarm payrolls and the unemployment rate.