Euro Made Modest Gains Overnight, But ECB Meeting Still Weighs

The euro inched above $1.32 on Tuesday morning as speculation that the European Central Bank would ease further grew following ECB President Mario Draghi’s remarks at the Jackson Hole summit. The common currency traded at $1.3205 at 7:30 GMT after falling to an 11-month low on Monday.

Over the weekend, Draghi warned that the bank’s inflation expectations for both the short and longer term have fallen and that it was prepared to use any and all of the tools in its war chest in order to combat the region’s falling prices. Most took his remarks, a departure from the speech released on the ECB website, as a clear signal that the bank was planning to intervene in the coming months. At the summit, Draghi assured investors that the bank was planning to address these issues at the ECB’s upcoming September 4 policy meeting.

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Also weighing on the euro was data from Germany which showed that the business climate index had fallen to 106.3 in August from 108 in July. The figure disappointed as analysts had expected a reading of 107.

On top of the eurozone’s worsening economic indicators, the region is dealing with a sanctions war with one of its largest trading partners, Russia. Tension between Russia and the West has reached levels not seen since the Cold War as international leaders try to pressure Moscow into helping end the ongoing conflict in Ukraine.

Though Russian President Vladimir Putin is set to meet with Ukraine’s Petro Poroshenko later on Tuesday, the Wall Street Journal reported that Kiev accused the Kremlin of moving Russian tanks across the Ukrainian border on Monday.  Poroshenko has said he is extremely concerned about this new development and most see the event hindering the upcoming peace talks.