Euro languished near four-month lows 2014
SYDNEY/SINGAPORE: The euro languished near four-month lows on Thursday with investors firmly sidelined as they waited to see what measures the European Central Bank would implement to tackle the threat of deflation.
The ECB is widely expected to cut interest rates, putting the deposit rate into negative territory for the first time. It is also seen offering longer-term loans linked to further lending, without launching large-scale asset purchases as the Bank of Japan has done.
The euro held steady on the day at $1.3598, not far from a four-month trough of $1.35855 plumbed on Tuesday on trading platform EBS. It has slumped almost 3 percent from highs near $1.4000 after ECB President Mario Draghi on May 8 prepared the market for possible policy action at the June 5 review.
“You’re likely to see pretty large swings in the spot price today on the back of the ECB statement and also the press conference,” said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.
The euro may end up rising over the next few days unless the ECB surprises the market by embarking on large-scale asset purchases, also known as quantitative easing (QE), he added.
“In terms of direction, our base case is, unless you see QE, the risk is of a bounce in euro,” Henderson said.
The ECB will announce its rate decision at 1145 GMT (7.45 a.m. EDT) and President Mario Draghi will give a news conference at 1230 GMT (8.30 a.m. EDT).