Euro Stumbles As ECB Hints At More Easing
The euro declined on Thursday after European Central Bank officials insinuated that the bank may ease further at next week's policy meeting. The common currency traded at $1.3759 at 7:25 GMT, nearly a one month low.
Investors were surprised at the beginning of March when the ECB elected to continue with its current policy, saying the region's recovery was progressing as planned. As a result, the common currency surged, feeding worries that the region could slip into a period of deflation.
The bloc's inflation rate has been dangerously low recently, prompting many to worry that it will fall further. Although ECB President Mario Draghi reassured investors that the bank doesn't see the inflation rate falling further at the last policy meeting, it seems the bank may change course as the euro's strength could put pressure on consumer prices.
According to Reuters , ECB governing council member Jens Weidmann said the bank was considering several options in order to fight deflation and keep the common currency's strength in check. Speaking on Tuesday, he said the bank would likely discuss negative interest rates as well as quantitative easing as options.
Later on the same day, bank President Mario Draghi confirmed that the bank is willing and prepared to act if need be. He said the bank will step in if data shows that the eurozone's inflation has fallen lower than the bank expected.
The comments sparked fresh speculation that the bloc is in store for another round of easing, which in turn deflated the euro. Moving forward investors will be focused on eurozone consumer price data for clues about the bank's intentions. The figures, due out on Tuesday, are expected to show that eurozone inflation far below the ECB's one percent target, at 0.7 percent.
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