The euro was under some pressure on Wednesday morning as markets became more certain that the European Central Bank would ease further at its June policy meeting. The common currency traded at $1.3717 at 5:50 GMT after hitting a five week low of $1.3688 overnight.
The euro has been on the decline since Thursday last week after ECB President Mario Draghi came out and said the bank would be comfortable taking action at its June meeting. Draghi told investors that the bank would evaluate the region’s financials, namely inflation data, and act in June if there was no improvement.
On Tuesday evening, the euro took another nosedive after the Wall Street Journal reported that Germany’s Bundesbank is open to supporting ECB stimulus measures if inflation figures warrant. The news surprised many as Bundesbank president Jens Weidmann has traditionally been opposed ECB policies, like the unlimited bond buying plan he put in place in 2012 to fight the region’s debt crisis.
The euro’s fading resistance to the ECB’s forward guidance is likely to make the currency more vulnerable to disappointing economic data, which analysts say is on its way. March industrial output, due out later on Wednesday, is expected to show a 0.2 percent decline.
Meanwhile, the dollar was resilient after Tuesday’s retail sales report came in lower than expected on Tuesday. The data showed that April retail sales were up just 0.1 percent at $434.6 from March’s figure. However the lackluster figures did little to sway the popular opinion that the US economy is back on track after stumbling in the first quarter.
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