Expectations of ECB rate cut prompt Euro fall
In early trading today, the Euro lost ground across the board on the investor view point that the ECB will take a more aggressive position towards easing monetary pressures, all while inflation in the Euro zone continues to drop back. Versus the U.S. Dollar and the Pound Sterling, the Euro dropped to its lowest price in three weeks, largely due to the ECB policymakers taking on a less hawkish tone. Expectations among investors is that inflation in the Euro zone will be below the ECB’s 2% target, which prompted profit taking on the Euro.
Vitor Constancio, a Governing Council Member for the European Central Bank, commented that, if necessary, monetary policy would address the possibility of further interest rate cuts in order to keep inflation hovering near 2%. He further commented that the ECB worries equally as much about inflation falling as rising.
In early morning trading, the Euro lost 1.3%, trading at $1.3423 after an earlier fall to $1.3400 which was the lowest trading price in nearly 3 weeks. Against the Pound Sterling, the Euro lost 1.2%, trading at 91.40 Pence, a small gain from an earlier low trade of 91.28 Pence; last week versus the Pound Sterling, it reached 98.05 Pence, a record high.