ECB Meeting Anticipation Impacts Euro
The euro wobbled on Thursday morning as investors cautiously awaited the European Central Bank meeting; set to take place later in the day. The common currency traded at $1.3733 at 6:45 GMT amid speculation that the bank was planning to ease further.
For five months, the region has been plagued by inflation figures below one percent, what the bank has called “the danger zone." The most recent figures showed that eurozone consumer inflation had stabilized at 0.8 percent, taking some of the pressure off the bank. However, that number is still well below the bank's two percent target.
Opinions are mixed as to whether or not the bank will go through with further easing. Data out on Wednesday showed that the region's business activity picked up as did retail sales. The positive economic indicators suggest that the eurozone economy is on the mend and take away some of the need for drastic stimulus measures.
On the other hand, Reuters reported that the International Monetary Fund has called for either a cut in the bank's key interest rate or another policy change that would add liquidity to the banking system. IMF officials said the bloc's dangerously low inflation was counteracting efforts to reduce the region's debt and making it difficult for fragile nations to remain competitive.
Most believe that the bank will stay away from cutting interest rates, and instead use another measure to add cash to the financial system. Some expect the ECB to release nearly 175 billion euros into its banking system by ending the “sterilization” of its bond buying program.
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