Euro Declines on Speculation Draghi Will Hint at Further Easingby and
Shared currency posts losses against most major peers
ECB policy makers expected to hold rates unchanged Thursday
The euro fell Wednesday on speculation that European Central Bank President Mario Draghi will signal the potential for further easing when policy makers gather Thursday.
The shared currency dropped against most major peers in New York, posting the steepest loss in a week versus the dollar.
While the euro has risen 1 percent since the ECB’s last meeting on speculation officials will refrain from fresh easing measures, that strength threatens to derail policy makers’ efforts to boost growth. Even though economists aren’t forecasting any change to ECB rates this week, a separate survey showed 60 percent of analysts predict more stimulus may come as soon as September. Last month, Draghi eased monetary policy by cutting rates to record lows and adding corporate bonds to the bank’s asset-purchase program.
“The euro has looked a bit vulnerable," Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto, said Wednesday. "There has been some speculative selling ahead of the ECB on the view that Draghi will not do anything tomorrow policy-wise but might sound dovish, and could open the door to lower rates again."
The euro was little changed at $1.1300 as of 7:52 a.m. in Tokyo Wednesday after dropping 0.5 percent in New York. It fell 0.1 percent to 124.03 yen.
"We see downside risks for the euro heading into the ECB meeting," Mark McCormick, North American head of foreign-exchange strategy in Toronto at Toronto Dominion Bank, said in an e-mail.
"They will push back against the recent tightening in financial conditions, reminding markets that their quantitative-easing policy is open-ended,” he said. “Draghi could also put another rate cut back on the table, which could reinforce the recent weakness in the euro."