Investors are all but convinced that the European Central Bank is on the verge of additional easing and have already begun the sell-off which sent the common currency Euro to a 2-year low versus its major rival, the U.S. Dollar. Last Friday, the head of the ECB, Mario Draghi, said that the future of the Eurozone looked bleak, and suggested that the current and excessive low inflation needed to be quickly raised. FX traders were awaiting the German IFO report for an indication on what business sentiment is in the Eurozone’s largest economy; the reading came in slightly better than expectations, at 104.7 as opposed to 103.0, which gave investors some hope.
As reported at 8:49 a.m. (GMT) in London, the EUR/USD was trading at $1.2359, not far from the recently struck 2-year trough at $1.2358. On Friday, the pair fell by more than 1.2%; currently, the IFO report provided some lift for the Euro as the pair is now trading higher at $1.2407. The EUR/JPY was also slightly higher at 147.7160 Yen, on the IFO report, moving away from a session low of 145.6076 Yen
ECB Poised to Ease
Despite the IFO, analysts have little doubt that the ECB will not follow through on its commitment to increase the ECB’s balance sheet to prevent the Eurozone economy from degrading further. Any additional easing will put further pressure on the Euro.