Euro Slips After Fed Decides To Continue Tapering
The euro lost some ground on Thursday morning after weak data from the eurozone added to evidence that the European Central Bank would be forced to intervene in order to prevent deflation.
The common currency traded at $1.3616 at 7:30 GMT as speculation that the Mario Draghi and his peers would make a policy change at next week's meeting circulated.
Reuters reported that data released on Wednesday showed that a general measure of cash in the eurozone economy fell sharply in December. The measurement, called the M3 money supply, grew at 1.0 percent annually, a steep drop from November's 1.5 percent growth. The report also revealed that loans to the bloc's private sector fell by 2.3 percent in December; no change from November's drop.
The newly released data will put more pressure on the European Central Bank to make a policy change which will promote lending to the real economy at next week's meeting. The bank has already taken interest rates to a record low, added liquidity to the banking sector and introduced a new government bond buying program. However, the bank's efforts have failed to fix the problem.
The euro also fell under pressure as the dollar strengthened when the US Federal Reserve elected to further taper its asset purchase program at Wednesday's policy meeting. The bank cited continued sustainable growth as its reason for another cut back and the dollar picked up momentum following the announcement of the decision. The meeting was the last for Fed Chairman Ben Bernanke as he handed over the reins to incoming Chairwoman Janet Yellen.
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