Emerging market currencies fell on Tuesday, coming under pressure by the strength of the U.S. Dollar and in the wake of mounting evidence that growth in China is slowing. The growing possibility that the Federal Reserve is also likely poised to raise interest rates is raising the greenback’s attractiveness and the U.S. Dollar Index, as a result, traded close to a 4-year peak at 87.2970 .DXY.
As reported at 10:50 a.m. (GMT) in London, the EUR/USD was trading at $1.2516. Despite the news from China about slower growth, currency-linked pairs managed to maintain momentum with the AUD/USD and the NZD/USD both trading higher at 0.8739 and 0.7765, respectively.
Draghi in the Spotlight
Later this week the markets will be preparing for the European Central Bank’s monetary policy decision. Today’s release by the European Commission essentially and broadly downgraded Eurozone growth through 2016; German growth is likely to grind to a halt, while France’s growth will continue to stagnate and Italy’s economy will likely suffer a contraction. The report indicated a delay in the recovery is likely to put additional pressure on Mario Draghi to bring out the heavy guns as regards stimulus measures, however Draghi has been insisting that the ECB can’t be alone in the fight and that the individual governments must enact reforms. Analysts are, nonetheless, expecting further weakening of the Euro.