Euro drops in Europe

The euro fell nearly half a percent on Wednesday after rocketing to a fresh three-year high above $1.23 as some investors ramped up bullish bets about the currency, though concerns voiced by policymakers this week damped broader optimism. Reflecting the apparent disquiet among some ECB policymakers about the euro's vigour, a remark by European Central Bank policymaker Ewald Nowotny that the euro's recent strength against the US dollar is "not helpful" encouraged a bout of profit-taking before a policy meeting next week.
"The euro's strength will cause some concerns to the ECB and it will definitely complicate their policymaking thinking, and some investors are taking profits after the recent rally," said Adam Cole, chief FX strategist at RBC Capital Markets in London. Overall dollar weakness and growing optimism about the outlook of the European economy in 2018 has lent fresh legs to the euro's rally after it gained more than 10 percent last year.
But the speed of the rise in the opening days of 2018 - up more than three percent in the last two weeks - has invited comment from ECB officials this week, highlighting some growing concerns, according to analysts. In an interview to an Italian daily la Repubblica, Vitor Constancio, the vice president of the European Central Bank, said he did not rule out that monetary policy would still continue to be "very accommodating for a long time".
On Tuesday, Jens Weidmann, Germany's representative on the ECB's policymaking body said it would be "appropriate" for the European Central Bank to stop its bond purchases, due to run at least until September. A Reuters source-based story on Tuesday reported that the ECB is unlikely to ditch a pledge to keep buying bonds at next week's meeting.
The single currency rose to a session high of $1.2323 against the dollar in Asian trading before falling 0.44 percent to stand at $1.2210. For euro bulls, these are key levels for a couple of reasons. Unlike in summer 2017, when positioning was not as stretched and valuations were still reasonably attractive, current levels are not as supportive for the single currency.
Elsewhere, Canada's central bank is widely expected to raise interest rates by 25 basis points and take the benchmark borrowing cost to 1.25 percent. Analyst expect the BoC to raise rates as many as three times in 2018. The Australian dollar rose 0.1 percent to $0.7970 and the New Zealand dollar dipped 0.1 percent to $0.7260.