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Euro Stays Weak On Easing Speculations

ByActionForex
Published 11/01/2013, 06:13 AM
Updated 03/09/2019, 08:30 AM
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The euro is set to be the weakest currency this week as yesterday's sharp decline continues. The common currency was pressured by speculation of additional easing from the ECB next week. The October CPI reading released yesterday dropped sharply to a four year low of 0.7%, well below the ECB's 2% target. It's perceived that ECB would see that as a growing threat of deflation. There were talks that the ECB could either cut interest from the current historical low or announce another LTRO.

ECB's Nowotny indicated earlier in the week that the central bank would provide more liquidity at upcoming meetings. He noted that the ECB has "other instruments available to provide liquidity" besides implementing another LTRO. Nowotny appeared to have ruled out the significance of further rate cut. He did not think that "having a negative deposit rate is a realistic perspective". Yet, he also did not "see a realistic perspective of lowering the main policy rate".

Elsewhere, the dollar is mixed against other currencies. USD/JPY's rebound was limited below 99.00 resistance and drops sharply today. Meanwhile, the yen is also trying to strength against European majors. The AUD/USD got some support from China's manufacturing data but there is not momentum for stronger rebound. The USD/CAD on the other hand, retreats after yesterday's stronger than expected GDP data.

The official Chinese PMI soared to 51.4, the highest level in 18 months, in October, from 51.1 a month ago. The data compiled by HSBC/Markit rose 0.7 point to 50.9 during the month. Australian PPI rose more than expected by 1.3% qoq, 1.9% yoy in Q3. Swiss SVME PMI, UK PMI manufacturing and US ISM manufacturing will be released later today.

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