Euro hits 10-day low versus dollar in Europe

20 Oct, 2015

The euro slipped to a 10-day low against the dollar on Monday, as investors eyed a European Central Bank meeting later in the week that could pave the way for further stimulus to boost inflation in the euro zone. Though most traders and analysts reckon the ECB will wait until its December meeting to announce anything new, they see a risk that additional easing measures could be flagged this Thursday and are betting ECB chief Mario Draghi will at least try to talk the currency down.
Many banks were expecting the euro to fall to parity with the dollar by the end of this year as the ECB pumps 60 billion euros into the economy each month. But since dipping below $1.05 in March, it has gained around 9 percent, adding to the deflationary pressures facing the euro zone.
On Monday, the single currency fell a third of a percent to $1.13085, its weakest since October 9. Against sterling, it fell 0.6 percent to a 3-1/2-week low of 73.055 pence. "There's not much in the way of news today...so all I can think is that people are setting themselves up for a dovish ECB meeting later in the week - that's really the big event on the horizon," said RBC Capital Markets FX strategist Adam Cole in London.
The Australian dollar was the biggest mover among major currencies, strengthening half a percent against its US counterpart to $0.7300 after GDP data from China which, though showing growth falling below 7 percent for the first time since 2009, was slightly better than had been expected. "We don't really think that rally is going to last," said Sam Lynton-Brown, a currency strategist at BNP Paribas in London. "Generally risk assets have performed in an environment of the Fed delaying tightening ... but the reason why the Fed is likely to be on hold is due to concerns about external factors."
After the ECB meeting, currency traders' focus will turn to the US Federal Reserve, which holds its policy meeting next week. Most expect the Fed to keep interest rates at their record lows, while investors are split over whether "lift-off" will come at December's meeting or in 2016.

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