Euro Edges Lower Ahead of ECB Meeting

The Euro edged off a 7-week peak against the U.S. Dollar and a multi-month peak against the Japanese Yen during the Asian trading session as investors take a breather to wait and see what the European Central Bank might next do as the conclusion of today’s policy setting meeting. Analysts expect that the central bank will keep the benchmark lending rate fixed at 0.75%, but are hopeful that Mario Draghi, the ECB head, might hint at a willingness to cut rates in the future. As reported at 11:10 a.m. (JST) in Tokyo, the EUR/USD pair was trading 0.1% lower at $1.3056, slipping from the session high of $1.3127 hit earlier on the EBS platform.

While the Yen did gain against the Euro, analysts are nearly unanimous in their certainty that the Yen is poised to weaken broadly as mid-month elections loom. The front-runner is Shinzo Abe who is likely to obtain a majority of votes and who has already voices his opinion that monetary policy must be aggressively loosened in order to lift the Japanese economy. The deputy governor of the Bank of Japan said yesterday that the members of the board will consider whether previous easing steps were sufficient to meet projections. One analyst at Citigroup said that they are telling clients that their outlook for the Japanese Yen in the medium term is decidedly bearish and despite a slight softening of Abe’s rhetoric they still believe that that stance is appropriate. The EUR/JPY pair was trading 0.1% lower to 107.74 Yen, coming off a 7½ month peak of 107.95 Yen struck on Wednesday.