Forex Market Update: Euro Slips Ahead of ECB Meeting
The euro edged lower against the U.S. dollar and the Japanese yen on Wednesday as traders remained cautious ahead of the European Central Bank (ECB) meeting on Thursday. Meanwhile, the yen has recovered after falling initially against the dollar.
Traders are focused on the important ECB meeting, scheduled for Thursday. The ECB is expected to keep the euro zone’s benchmark interest rates unchanged, given that recent economic data from the region has been encouraging. Market participants are waiting for ECB President Mario Draghi’s comments on the euro zone economy.
Speaking to Reuters, Camilla Sutton, Chief Currency Strategist at Scotia Capital in Toronto, said that the focus is speculation over Thursday’s ECB statement and President Draghi’s press conference. Sutton expects Draghi to sound notably cautious and euro to weaken on the back of it.
While the euro zone economy has stabilized, there are still concerns over the debt crisis, especially in the wake of political uncertainty in Spain and Italy. In Spain, pressure is mounting on Prime Minister Mariano Rajoy to resign following a corruption scandal. Meanwhile, prospects of a Silvio Berlusconi win in this month’s general election in Italy have stoked fears that the country’s reform process will be stalled.
Antje Praefcke, currency strategist at Commerzbank, told Reuters that the market is a bit nervous ahead of the ECB meeting.
At last check on Wednesday, the euro was down 0.4% to $1.3535. The single currency is still up more than 2.5% for the year against the dollar. Against the yen, the euro slipped 0.5% to 126.63 yen after touching a 34-month high of 127.69 earlier in the day.
The yen also recovered against the dollar after falling to its lowest level against the greenback since May 2010. At last check, the dollar was trading 0.1% lower at 93.52 yen.
Although the yen has recovered, the outlook for the Japanese currency remains bearish amid speculation that the Bank of Japan will implement further easing measures to boost growth in the world’s third-largest economy.