The Euro Slides Lower On Easing Expectations

The euro neared a six week low on Thursday amid speculation that the European Central Bank would ease further at its June meeting.

The common currency traded at $1.3707 at 6:34 GMT.

Rising expectations about some sort of monetary stimulus from the ECB helped push government debt yields lower and put pressure on the single currency.

On Wednesday, Reuters reported that the ECB has been working on putting together a package of policy options in preparation for its June meeting. The bank is considering options like cutting all of its interest rates as well as designing targeted measures that will increase lending to the bloc’s smaller firms.

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Last week the single currency was at a two and a half year high of $1.3995; but following May’s ECB meeting and President Mario Draghi’s remarks that the bank was comfortable making a move in June, the euro plummeted. On Tuesday, the euro hit a six week low of $1.3688, not far from where it began the day on Thursday.

Moving forward, investors will be carefully assessing key economic data for any indication of the bank’s future plans. Later on Thursday, the eurozone will release first quarter GDP data as well as April’s CPI report. 

If the data disappoints, bets will be on for the bank to step in.

Some analysts question whether the bank will use quantitative easing in order to help keep the euro from strengthening.

Although Draghi expressed concern about the euro’s strength at this month’s meeting, most don’t expect the bank to use an asset buying program right away. Instead, the bank is likely to ease further one step at a time, eventually resorting to some sort of quantitative easing package.