With the European Central Bank rate decision looming only hours away, the Euro held close to a 4-month trough during the Asian trading session as investors take a wait and see approach. Analysts polled are generally in agreement that the ECB will take up some stimulus measures to pull the Eurozone economy up and out of the long enduring period of low inflation, but the disagreement stems from what measures exactly will be implemented. The options for the ECB include a wide range of interest rate cuts, including to negative deposit rates, and LTROs, a form of long term loans to stimulate credit conditions in the periphery.
As reported at 12:15 p.m. (JST) in Tokyo, the EUR/USD was trading at $1.3598, close to Tuesday’s $1.35855, a level last seen in February. Since May 8th when Mario Draghi, the ECB head, began hinting at possible easing, the EUR/USD had lost nearly 3% of its value. Market conditions are likely to be extremely volatile in the wake of the announcement and especially after the press conference which follows.
NFP Outlook Could Disappoint
In the U.S., mixed economic data showed improvement in growth in the services sector, however ADP payrolls, which is often looked to for clues for the all-important non-farms payroll release, showed that new hiring in May was fewer than analysts had expected, raising some concerns that tomorrows NFP figures could also disappoint. The U.S. Dollar Index remained near to a 4-month high and was trading at 80.649 .DXY.