Forex Market Update: Euro Eases against the Dollar Ahead of ECB Meeting
The euro eased against the Japanese yen and U.S. dollar on Monday after climbing to multi-year highs last week. The single currency slipped as traders booked profit after the recent rally.
Traders were also cautious ahead of the European Central Bank (ECB) meeting this Thursday. The euro was also dragged lower by after disappointing jobs data from Spain. Spain’s registered unemployment rate rose in January as the euro zone’s fourth-largest economy continues to struggle with an economic downturn.
The figures released on Monday showed that people registering for jobless benefit climbed 132,055 in January to 4.98 million. Spain’s unemployment rate stands at 26%.
Also weighing on the euro was political uncertainty in Spain and the region’s third largest economy, Italy. At last check, the single currency was trading 0.4% lower to $1.3574. Euro fell to an intra-day low of $1.3580. On Friday, the euro climbed sharply against the dollar after the U.S. nonfarm payrolls data showed modest improvement in the labor market.
The euro also retreated against the yen on Monday. At last check, the single currency was down 0.2% to 126.51 yen. Last week, the euro rose to 126.97 yen, which was the highest level in nearly two and a half years.
Despite the pullback, analysts expect the euro to remain strong as the ECB is expected to keep interest rates unchanged at its meeting later this week.
Speaking to Reuters, Adam Myers, Senior FX Strategist at Calyon, said that once the ECB fails to cut rates on Thursday, which is his view, the euro will be free to move even higher again, but with the uncertainty surrounding the meeting the euro will likely weaken slightly or trade sideways.
Meanwhile, the yen is expected to remain weak after the Bank of Japan recently announced aggressive monetary easing measures to stimulate the world’s third largest economy. The dollar rose to 93.10 yen on Monday.
Myers said that the yen will remain weak, though it will not likely be sold at the momentum seen last week. He noted that investors would be looking to buy the euro and the dollar against the yen on dips.