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Euro Hangs In The Balance Ahead Of ECB Meeting

Euro Hangs In The Balance Ahead Of ECB Meeting

The euro dipped lower on Thursday morning as investors prepared for the highly anticipated European Central Bank meeting, set to take place later in the day.

The common currency traded at $1.36 at 7:30 GMT after a week of poor eurozone data put even more pressure on the bank to ease.

This week was a disappointing one in terms of eurozone data.

On Monday, PMI data showed that the region’s factory activity was sputtering with France posting a figure below the 50 point mark which separates expansion and contraction and Germany suffering another dip.

The report was followed by inflation data released on Tuesday which showed the region’s already dangerously low consumer prices had fallen further. May inflation was down to 0.5 percent, far below the ECB’s two percent target and in what the bank deemed a “danger zone” below one percent.

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On Wednesday, Reuters reported that eurozone GDP in the first quarter improved by just 0.2 percent. The news took the euro below $1.36 as it confirmed what most were expecting; that the region’s recovery was sputtering.

The ECB is widely expected to make a bold policy move to devalue the euro and fight the region’s falling inflation figures. Most foresee the bank cutting its main interest rate, lowering its deposit rate to below zero, creating a new quantitative easing program or enacting some combination of those three.

With markets assuming that ECB action is a given, the bank would create turmoil if it elected not to step in. 


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